Question

Which of the following statements is not true? Group of answer choices Price elasticity of demand for basic foods is low. When price elasticity of demand is very high, we say there is brand loyalty. The availability and price of substitutes affect the elasticity of demand for a good or service. When goods have very low prices, the elasticity of demand is usually quite low. Elasticities increase as the price of the good increases.

Answer 1

Answer:

Incorrect Statement : When price elasticity of demand is very high, we say there is brand loyalty

Explanation:

Price elasticity of Demand is the responsiveness of quantity demanded to a change in price. That is, how much demand changes when there is a change in price. If demand changes significantly, it is price elastic (PED > 1), where the % change in price is lower than the % change in quantity demanded. On the other hand, if the change in demand is insignificant it is price inelastic (PED < 1), where the % change in price is higher than the % change in quantity demanded.

Brand loyalty is where consumers are likely to continue to purchase a product even with price changes and even if there are many other substitutes i.e. they are loyal to that brand. Hence, products with brand loyalty tend to be price INELASTIC, where even if the price is raised, it won’t impact demand as much since they still want to consume that product from that brand.