If the quantity sold of two-liter Coke bottles increases by 10% when price falls by 2%,...

Question

Question

If the quantity sold of two-liter Coke bottles increases by 10% when price falls by 2%, then two-liter bottles of coke are?

a. Elastic

b. Inelastic

c. I don’t know, man

business economics

Answer 1

Answer #1

Answer

Price elasticity of demand =%change in quantity/%change in price

=10/(-2) ............ the negative sign for a fall in price

=-5

the elasticity of demand is below -1 so it is elastic, it means a small change in price has more change in demand.

Option a

Answer 2

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