Understanding Elasticity of Demand

Easy Microeconomics Elasticity

Consider a market where the price elasticity of demand for a particular good is measured to be -2. This indicates that for every 1% increase in the price of this good, the quantity demanded decreases by 2%. Based on this elasticity measure, what can be concluded about the demand for this good?

The good is a necessity, and consumers will significantly reduce their consumption if the price rises.

The good is elastic, and consumers respond strongly to price changes.

The good is inelastic, and consumers will not reduce their consumption if the price rises significantly.

Hint

Submitted7.8K

Correct7.2K

% Correct92%