Suppose fish steak and spaghetti are the only alternatives available during lunch hours at an office cafeteria.If a nominal change in the price of fish steak brings about a prominent change in the demand for spaghetti we can conclude that the latter has a high demand elasticity.

Question

Quizplus · Accepted Answer

If a small change in the price of fish steak causes a significant change in the quantity demanded of spaghetti, it suggests that spaghetti has a high demand elasticity. This means that consumers are highly sensitive to changes in the price of spaghetti, and will respond by either buying more or less of it depending on the price level. Therefore, the statement in the question is true.

Suppose Fish Steak and Spaghetti Are the Only Alternatives Available