Case-Based Critical Thinking Questions
Case 10-1
You have been having some difficulty in your economics class this semester,so you have requested support from a tutor.One topic that is giving you trouble at the moment is the price elasticity of demand.
-Increasing the price of an item by 10% decreases demand by only 1%.This is an example of what kind of elasticity,according to your tutor?
A) relatively inelastic
B) perfectly inelastic
C) relatively elastic
D) perfectly elastic

Question

Quizplus · Accepted Answer

The elasticity of demand can be classified into four types: perfectly elastic, relatively elastic, perfectly inelastic and relatively inelastic. When the percentage change in price results in a proportionately greater percentage change in quantity demanded, it is known as relatively elastic. In this case, since the percentage change in price is more than the percentage change in quantity demanded, it is known as relatively inelastic. Therefore, the best choice is A.