PRC-3 · Chapter 11 · Question 1 of 57
A supermarket lowers the price of its premium coffee from Rs. 500 to Rs. 400 (a 20% drop). In response, the quantity demanded surges from 1,000 bags to 1,500 bags (a 50% increase). How is the price elasticity of demand (PED) for this coffee categorized?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Relatively elastic
Explanation
Because the percentage change in quantity demanded (50%) is much greater than the percentage change in price (20%), the demand is relatively elastic (PED > 1).
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