Which of the following statements is true of price elasticity?
A) Elastic products have few substitutes and price changes make little difference in demand.
B) Inelastic products have many substitutes and price changes lower demand.
C) Elasticity is the idea that the market's demand for a product or service is sensitive to changes in its price.
D) Gas for your car is an example of an elastic product.

Question

Quizplus · Accepted Answer

Price elasticity refers to the degree to which a change in price affects the demand for a product or service. Elasticity is sensitive to changes in price, meaning that the demand for the product or service is easily impacted by price changes. Therefore, option C is the correct statement. Option A is incorrect because elastic products have many substitutes that consumers can easily switch to if the price changes, making price changes important in demand. Option B is incorrect because inelastic products have few substitutes, and price changes do not have much effect on demand. Option D is incorrect because gas for your car is an example of an inelastic product because there are not many substitutes for it, and consumers will still purchase gas, even if the price increases.

Which of the Following Statements Is True of Price Elasticity