When the quantity demanded changes by a greater percentage than the change in price, the demand is described as?

When the quantity demanded changes by a greater percentage than the change in price, the demand is described as?

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

Answer: (A)

This describes price elasticity of demand. If the quantity demanded moves by a larger percentage than the price changes, demand is elastic (elasticity greater than 1). That means consumers are highly responsive to price: a small fall in price leads to a sizable increase in quantity demanded, and a price rise leads to a sizable drop. This often happens for goods with close substitutes or non-essentials, and the responsiveness tends to be greater over longer time horizons. In contrast, if quantity changes by less than the price, demand is inelastic; if it changes by the same amount, it’s unit elastic; and if buyers are infinitely responsive to any price change, demand would be perfectly elastic.

This describes price elasticity of demand. If the quantity demanded moves by a larger percentage than the price changes, demand is elastic (elasticity greater than 1). That means consumers are highly responsive to price: a small fall in price leads to a sizable increase in quantity demanded, and a price rise leads to a sizable drop. This often happens for goods with close substitutes or non-essentials, and the responsiveness tends to be greater over longer time horizons. In contrast, if quantity changes by less than the price, demand is inelastic; if it changes by the same amount, it’s unit elastic; and if buyers are infinitely responsive to any price change, demand would be perfectly elastic.