Question

The price elasticity of demand for mobile phones a. will be higher if there is an improvement in the production technology. b. will be lower if consumers perceive mobile phones to be a necessity. c. is computed as the percentage change in the price of mobile phones divided by the percentage change in quantity of mobile phones. d. All of the above are correct.

Answer 1

Answer:

b. will be lower if consumers perceive mobile phones to be a necessity.

Explanation:

The price elasticity of demand is described as the percentage variation in the demanded quantity of service or goods divided by the change in the percentage of the price. And henceforth it describes the responsiveness of the demanded quantity to a price change. And now if the mobile phones are thought of as being the necessity then the price will increase as demand will increase, and hence the price elasticity of demand will be lower. And if there is an improvement in the production technology then the price will be lowered, and hence price elasticity of demand will be less as the change in the percentage of the price will be negative. And the exact definition of it as we have described above. Hence, b is correct options.