Question

A book on how to invest in collectibles spends several weeks on best seller lists. The paperback book was originally released for $9.99. A reduction of the price to $9.79 had little effect total revenue, which remained the same. This is due to the book having:

Answer 1

Answer:

inelastic demand

Explanation:

Price elasticity of demand (PED) measures the proportional change in quantity demanded when the price of a product or service changes:

• when a 1% decrease in price, increases quantity demanded in a smaller proportion, the PED is said to be inelastic.
• when a 1% decrease in price, increases quantity demanded in a larger proportion, the PED is said to be elastic.
• when a 1% decrease in price, increases quantity demanded in the same proportion, the PED is said to be unit elastic.

In this case, the decrease in price (-2%) barely increased the quantity demanded, therefore, the PED is inelastic.