A demand that responds very strongly to price changes is said to be which type?

A demand that responds very strongly to price changes is said to be which type?

• A. Elastic Demand
• B. Inelastic Demand
• C. Unit Elastic Demand
• D. Perfect Elastic Demand

Answer: (A)

Elastic demand is tested here. It describes a situation where people adjust quantities sold very a lot when prices move. If the price falls even a little and quantity demanded rises a lot, or if the price rises and quantity demanded falls sharply, the demand is elastic. In other words, the price elasticity of demand (the percentage change in quantity over the percentage change in price) is greater than 1 in magnitude. This happens with goods that have many close substitutes or are nonessential luxuries, where consumers can easily change how much they buy when prices change. Keep in mind the contrasts: inelastic demand means quantity changes little when price changes (elasticity less than 1), unit elastic means the percentage change in quantity equals the percentage change in price (elasticity exactly 1), and perfect elastic describes an extreme where buyers would buy any amount at one price and none at any higher price (an idealized, almost never-seen situation with a perfectly horizontal demand curve).

Elastic demand is tested here. It describes a situation where people adjust quantities sold very a lot when prices move. If the price falls even a little and quantity demanded rises a lot, or if the price rises and quantity demanded falls sharply, the demand is elastic. In other words, the price elasticity of demand (the percentage change in quantity over the percentage change in price) is greater than 1 in magnitude. This happens with goods that have many close substitutes or are nonessential luxuries, where consumers can easily change how much they buy when prices change.

Keep in mind the contrasts: inelastic demand means quantity changes little when price changes (elasticity less than 1), unit elastic means the percentage change in quantity equals the percentage change in price (elasticity exactly 1), and perfect elastic describes an extreme where buyers would buy any amount at one price and none at any higher price (an idealized, almost never-seen situation with a perfectly horizontal demand curve).