Question

Assume that the price of good X decreases from $10 to $9 per unit and that the quantity demanded of good X increases from 25 to 30 units. In this price range, the demand for good X is

inelastic


a

elastic


b

unit elastic


c

perfectly inelastic


d

perfectly elastic

Answer 1

Elastic.

%ΔQ = (30 − 25)/25 = 20% ; %ΔP = (9 − 10)/10 = −10% → elasticity = 20% / 10% = 2 (|ε| = 2 > 1), so demand is elastic.