Elastic demand is when the quantity demanded changes by a greater percentage than the change in price; |PED|

Elastic demand is when the quantity demanded changes by a greater percentage than the change in price; |PED|

• A. > 1
• B. < 1
• C. = 0
• D. = 1

Answer: (A)

Elastic demand means the quantity demanded responds strongly to price changes. The measure, PED, uses the magnitude of the percentage change in quantity divided by the percentage change in price. When the quantity changes by a larger percentage than the price, this ratio has an absolute value greater than 1. So, elastic demand corresponds to |PED| > 1. That’s why the correct choice is the one indicating a value greater than 1. For intuition, if price rises 10% and demand falls 20%, PED is -2 (magnitude 2), which is elastic. If price changes produce smaller proportional changes in quantity, the magnitude would be less than 1 (inelastic). If it’s exactly proportional, it’s unit elastic (magnitude 1).

Elastic demand means the quantity demanded responds strongly to price changes. The measure, PED, uses the magnitude of the percentage change in quantity divided by the percentage change in price. When the quantity changes by a larger percentage than the price, this ratio has an absolute value greater than 1. So, elastic demand corresponds to |PED| > 1. That’s why the correct choice is the one indicating a value greater than 1. For intuition, if price rises 10% and demand falls 20%, PED is -2 (magnitude 2), which is elastic. If price changes produce smaller proportional changes in quantity, the magnitude would be less than 1 (inelastic). If it’s exactly proportional, it’s unit elastic (magnitude 1).