Dayco increased the price of the drive belts that it sells to General Motors by 5 percent and sales of the item grew by 9 percent. Price elasticity of demand for drive belts appears to be:

Question

Quizplus · Accepted Answer

The fact that sales grew by 9 percent despite a 5 percent increase in price suggests that the demand for drive belts is relatively inelastic. In other words, customers were willing to pay the higher price because they needed the product and there weren't many good substitutes available.

Dayco Increased the Price of the Drive Belts That It