If the price of an item increases by 8% while the quantity demanded falls from 1500 units to 1492 units, the demand is said to be

Answer Details

If the price of an item increases by 8% while the quantity demanded falls from 1500 units to 1492 units, the demand is said to be inelastic. Elasticity of demand is a measure of how much the quantity demanded of a good or service changes in response to a change in its price. When demand is inelastic, this means that changes in price have a relatively small effect on the quantity demanded. In this case, we can see that the price of the item increased by 8%, but the quantity demanded only fell by 0.5%. This suggests that the item is something that people still need or want, even at the higher price. If the item had been perfectly elastic, a small increase in price would cause a large decrease in quantity demanded. If the item had been elastic, a small increase in price would still cause a significant decrease in quantity demanded. If the item had been perfectly inelastic, changes in price would have no effect on the quantity demanded. In summary, if the price of an item increases by 8% while the quantity demanded falls from 1500 units to 1492 units, the demand is said to be inelastic. This means that changes in price have a relatively small effect on the quantity demanded.