If the demand for smart phones is price inelastic, a. changes in price do not af

Question

If the demand for smart phones is price inelastic,

a. changes in price do not affect the number of smart phones demanded.

b. if more smart phones are sold as the result of a price decrease, total expenditures by consumers on smart phones will decrease.

c. the percentage change in price of smart phones is less than the percentage change in quantity demanded of smart phones.

d. the percentage change in quantity demanded of smart phones is greater than the percentage change in price of smart phones.

e. none of the above

Explanation / Answer

Option (e).

Elasticity of demand = % Change in quantity demanded / % Change in price.

Demand is price inelastic if absolute value of Elasticity is less than 1, or

(% Change in quantity demanded / % Change in price) < 1, or

% Change in quantity demanded < % Change in price.

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