The value of the absolute price elasticity of demand for good X is 3. The absolute price elasticity for good Y is 2. Which good's quantity demanded is less responsive to a change in price?
A) Good X.
B) Good Y.
C) They are equally responsive.
D) Not enough information is given.

Question

Quizplus · Accepted Answer

The greater the value of the absolute price elasticity of demand, the more responsive the quantity demanded is to a change in price. Since the absolute price elasticity for good Y is 2, it shows that the quantity demanded for good Y is more responsive to a change in price compared to good X, which has an absolute price elasticity of 3. Therefore, the quantity demanded for good X is less responsive to a change in price compared to good Y. Thus, the best choice is B (Good Y).

The Value of the Absolute Price Elasticity of Demand for Good