Question

Dan sells newspapers. Dan says that a 8 percent increase in the price of a newspaper will decrease the quantity of newspapers demanded by 4 percent. According to Dan, the demand for newspapers is ________.

Answer 1

Answer:

For Dan, the demand is price inelastic

Explanation:

One of the factors tat affect the quantity demand for a product is the price of the product. According to the law of demand, at lower price more quantity of a product would be purchased than at a higer price, all other this being being equal.

Price elasticity of Demand (PED)

The extent to which a change in price will cause a change in the quantity demand for a product is called the price elasticity of demand. It measures the degree of responsiveness of quantity demand to a change in price.

It is calculated as

PED =% change in quantity demand / % change in price.

For Dan Newspaper , the price elasticity of demand

             = 4%/8%

            = 0.5

If the PED is greater than 1, the demand is price elastic

If the PED is less than 1 , demand is price inelastic

For Dan, the demand is price inelastic