Which of the following statements reflects elastic demand for a product A price

Question

Which of the following statements reflects elastic demand for a product A price cut won't help me. It won't increase sales, and I'll just get less money for each unit. I don't think a price cut will make any difference to my bottom line. What I may gain from selling more I would lose on price. My customers are real burgain hunters. Since I set my prices just a few cents below my competitors, sales are booming with the recent economic recovery, people have more income to spend and sales are booming, even at the previous prices. None of the above The long-run supply curve is likely to be If resources are allocated efficiently, With a price set below the equilibrium price, which statement is true

Explanation / Answer

7. Elasticity of demand refers to the degree of responsiveness of quantity demanded to change in price. Demand is said to be elastic if a proportionate change in price leads to a more than proportionate change in quantity demanded.

In the given case, first 2 cases do not represent elastic demand since a change in price has no effect on quantity.

The third option represents an elastic demand since a price cut by the producers has led to much more increase in demand by consumers.

The fourth option talks about income elasticity.

Therefore, the correct option is (c)

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