Question

If demand price elasticity measures 2, this implies that consumers would Group of answer choices buy twice as much of the product if the price drops 10 percent. require a 2 percent drop in price to increase their purchases by 1 percent. buy 2 percent more of the product in response to a 1 percent drop in price. require at least a $2 increase in price before showing any response to the price increase. buy twice as much of the product if the price drops 1 percent.

Answer 1

Answer:

buy twice as much of the product if the price drops 10 percent.

Explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.  

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.  

Infinitely elastic demand is perfectly elastic demand. Demand falls to zero when price increases

Perfectly inelastic demand is demand where there is no change in the quantity demanded regardless of changes in price

If price elasticity is 2, it means that the percentage change in quantity demanded is twice greater than the percentage change in price

If price drops by 10%, and elasticity is 2, demand would increase by 20%

2 = percentage change in quantity demanded / percentage change in price

2 =  percentage change in quantity demanded / 10

Percentage change in quantity demanded = 10 x 2 = 20