Question

When the price of a brand new Blu-ray player was $300 each, only 100 people in the small town bought one. When the price dropped to $50 each, then 1000 people bought one. This is an example of...

Answer 1

Answer:

Elastic demand.

Explanation:

The term elastic demand describes a situation where a small change in price causes a considerable change in demand. In other words, the change in demand is not proportionate to the change in price.

As per the law of demand, an increase in price decreases the quantity demanded. The term elastic in this context means stretching or moving. A good has elastic demand if its demand is highly responsive to changes in price.

In the case of the Blu-ray player, the price changed from $300 to $50. A drop of $250. As a percentage, the price dropped by (250/300 x 100) = 83.3%. The demand increased from 100 to 1000. An increase of 900 units. The percentage increase =(900/100 x 100)=900%.

The demand for Blu-ray is elastic. A price decline of  83% causes the demand to rise by 900%.