PRC-3 · Chapter 11 · Question 16 of 57
A fashion retailer lowers the price of its jackets by 10%. As a direct result, the quantity demanded increases by 30%. How would an economist classify the price elasticity of demand for these jackets?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Relatively elastic
Explanation
Demand is relatively elastic when the percentage change in quantity demanded (30%) is greater than the percentage change in price (10%), yielding a PED greater than 1.
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