What would indicate relatively elastic demand?

What would indicate relatively elastic demand?

• A. Price increase leads to increased revenues
• B. Price decrease causes large changes in sales
• C. Price changes have minimal impact on sales
• D. Price remains constant regardless of competition

Answer: (B)

Relatively elastic demand occurs when consumers respond significantly to changes in price. The correct choice reflects this concept perfectly because a price decrease leading to large changes in sales shows that consumers are very sensitive to price adjustments. When the price drops, a substantial increase in the quantity sold indicates that customers are incentivized to buy more due to the lower cost, which demonstrates a high elasticity of demand. In contrast, pricing scenarios that lead to increased revenues following a price increase typically suggest inelastic demand, where consumers continue to buy despite higher costs. Moreover, minimal impact on sales from price changes signifies that demand is inelastic, as consumers are not sensitive to price fluctuations. Lastly, a situation where the price remains constant regardless of competition would imply a lack of responsiveness in demand, further suggesting an inelastic market scenario. Thus, option B effectively illustrates the concept of elastic demand by indicating how price decreases can lead to significantly increased sales.

Relatively elastic demand occurs when consumers respond significantly to changes in price. The correct choice reflects this concept perfectly because a price decrease leading to large changes in sales shows that consumers are very sensitive to price adjustments. When the price drops, a substantial increase in the quantity sold indicates that customers are incentivized to buy more due to the lower cost, which demonstrates a high elasticity of demand.

In contrast, pricing scenarios that lead to increased revenues following a price increase typically suggest inelastic demand, where consumers continue to buy despite higher costs. Moreover, minimal impact on sales from price changes signifies that demand is inelastic, as consumers are not sensitive to price fluctuations. Lastly, a situation where the price remains constant regardless of competition would imply a lack of responsiveness in demand, further suggesting an inelastic market scenario. Thus, option B effectively illustrates the concept of elastic demand by indicating how price decreases can lead to significantly increased sales.