How much do you know about price elasticity of demand and its impact on business...
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What is price elasticity of demand?

  • The degree to which a change in quantity demanded affects the price of a good or service
  • The degree to which a change in price affects the quantity demanded of a good or service (correct)
  • The degree to which a change in supply affects the price of a good or service
  • The degree to which a change in demand affects the quantity supplied of a good or service

    • What does a high price elasticity of demand indicate?

  • Consumers are highly sensitive to changes in price (correct)
  • Consumers are not sensitive to changes in price
  • The product is a necessity
  • The product is a luxury

    • What are the implications of price elasticity of demand for businesses?

  • Businesses can set any price they want without affecting sales volume
  • Businesses should only sell products with a high price elasticity of demand
  • Businesses should only sell products with a low price elasticity of demand
  • Businesses may need to adjust prices in order to maintain sales volume (correct)

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