The own-price elasticity of the demand for water among urban residential users is -0.20 in summer and -0.06 in winter. Compare the elasticities by season.
A) The demand is inelastic in both seasons.
B) The demand is more elastic in the summer.
C) The demand is less elastic in the winter.
D) All of the above.

Question

Quizplus · Accepted Answer

The own-price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good, with a negative value indicating that the quantity demanded decreases as the price increases. A value in absolute terms less than 1 indicates inelastic demand, meaning consumers are not very responsive to price changes. Since both -0.20 and -0.06 are less than 1 in absolute value, the demand is inelastic in both seasons (A). The demand is more elastic in summer than in winter because the absolute value of -0.20 is greater than -0.06 (B), which also implies that the demand is less elastic in winter (C). Therefore, all statements are correct.

The Own-Price Elasticity of the Demand for Water Among Urban