Kevin and Sarah are working on pricing for their gourmet dinner home delivery bu

Question

Kevin and Sarah are working on pricing for their gourmet dinner home delivery business. Even though they are targeting affluent families, they know that price is important to their potential customers. Kevin is a great cook but has little training in economics or accounting and knows nothing about elasticity. He looked up elasticity on Google and found the following. Which of them is not true?

1) Elasticity measures the consumer’s response to changes in price

2) Elasticity is calculated using the percent of change in demand (quantity) compared to the percent of change in price.

3) If the coefficient of elasticity is greater than 1 then the product is inelastic

4) All of these are accurate

5) Only A and B are accurate

Explanation / Answer

3) If the coefficient of elasticity is greater than 1 then the product is inelastic

This statement is not true regarding elasticity. When coefficient of elasticity is equal to 0 then the product is inelastic. If the value is 1 or more than 1 then it is elastic. So this statement is wrong.

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