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In market A, a 4% increase in price reduces quantity demanded by 2%. In market B, a 3% increase in price reduces quantity demanded by 4%. The price elasticity of demand in market A and market B are considered______ and ______, respectively

Respuesta :

Answer:

Inelastic

Elastic

Explanation:

The price elasticity of demand measures the responsiveness of quantity demanded to changes in price.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

In market A ,

2% / 4% = 0.5

If the coefficient of elasticity is less than 1, demand is inelastic. Inelastic demand means that a little change in price has little or no effect on quantity demanded.

In market B,

4% / 3% = 1.3

If the coefficient of elasticity is greater than one, it indicates that demand is elastic. Elastic demand means that quantity demanded is more sensitive to changes in price.

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