Question

Dan sells newspapers. Dan says that a 4 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 8 percent. According to Dan, the demand for newspapers is ________.
A) inelastic
B) unit elastic
C) perfectly elastic
D) elastic

Answer 1

Based on the percentage change in price and the percentage change in the quantity demanded for newspapers, demand is elastic.

What is the price elasticity of demand?

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

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

Price elasticity of demand = 8/4 = 2

What is elastic demand?

Demand is elastic when the coefficient is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.

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