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Let's say the demand elasticity for Aaron's scones is |.5|. Then for a 1% increase in prices, there will be a .5% _______in quantity demanded. Demand is ____.

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tutordamola

Answer:

Decrease; inelastic

Explanation:

Let's say the demand elasticity for Aaron's scones is |.5|. Then for a 1% increase in prices, there will be a .5% DECREASE in quantity demanded. Demand is INELASTIC.

Because demand elasticity is greater than one(1.5), it is price elastic i.e it is sensitive to price. An increase in price will lead to a decrease in quantity demanded and vice-versa.

But because the responsiveness in quantity demanded or the sensitivity to the change in price is not significant, the demand is inelastic.

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