At very low prices, a firm cannot stimulate demand further because market saturation is reached and consumers begin to perceive quality to be inferior. Thus, the price elasticity of demand at these low price levels is
A) reversed.
B) unitary.
C) elastic.
D) inelastic.

Question

Quizplus · Accepted Answer

At very low prices, further price reductions do not significantly increase demand because of market saturation and perceptions of inferior quality, making the price elasticity of demand inelastic. This means consumers' demand does not change much with price changes at these levels.

At Very Low Prices, a Firm Cannot Stimulate Demand Further