PRC-3 · Chapter 11 · Question 28 of 57
A retail store cuts the price of its backpacks by 10%. As a result, the quantity demanded surges by an impressive 40%. The price elasticity of demand for these backpacks is:
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 (40%) is greater than the percentage change in price (10%), yielding an elasticity > 1.
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