Question

The price elasticity of demand for cars in Georgia is 1.8, whereas the price elasticity of demand for cars in Kentucky is 0.3. In other words, demand in Georgia is ____________ and demand in Kentucky is________.

Answer 1

Ans. The demand in Georgia for cars is elastic because of the price elasticity of demand for cars in Georgia is highly elastic ( i.e. Ed= 1.8 and Ed >1, elastic),  

Elastic demand means that a percentage change in the price of cars leads to a larger percentage change in quantity demand for cars. In other words, the demand for cars is highly responsive to changes in the price of cars in Georgia.

the demand in Kentucky for cars is inelastic because of the price elasticity of demand for cars in Kentucky is less elastic (i.e. Ed = 0.3 and Ed<1, inelastic)

Inelastic demand means that a percentage change in the price of cars leads to a small percentage change in quantity demand for cars. In other words, the demand for cars is less responsive to changes in the price of cars in Kentucky.