If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the demand for Pepsi-Cola is
A)unit elastic
B)perfectly elastic
C)perfectly inelastic
D)relatively elastic
E)relatively inelastic

Question

Quizplus · Accepted Answer

The demand for Pepsi-Cola is relatively elastic because a 20% increase in price (from 50 cents to 60 cents) resulted in a 50% decrease in quantity demanded (from 100 cans to 50 cans). This suggests that consumers are sensitive to changes in price and will decrease their demand significantly when the price increases.

If the Price of Pepsi-Cola Increases from 50 Cents to 60