Suppose that when the price for Good A increases by 7 percent, the quantity demanded for that product decreases by 2 percent. Ac
1 answer:
Answer:
The own price elasticity is 0.28.
The demand for good a is inelastic.
Explanation:
The price elasticity of demand for a product is the change in the quantity demanded of a product due to a change in its price.
When the price of good A increases by 7% the quantity demanded of that product decreases by 2%.
The own price elasticity of demand
=
=
= 0.28
The elasticity of demand is less than 1, this implies that demand is inelastic.
A greater change in price is leading to a smaller change in quantity demanded.
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