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JAMB Economics 1990 Question 15

Question 15

Elasticity

The demand for a product is said to be price inelastic if

  1. A.the price elasticity of demand is less than one
  2. B.the price elasticity of demand is greater than one
  3. C.a reduction in price results in an increase in the quantity demanded
  4. D.an increase in price results in a decrease in the quantity demanded
Show the answer and explanation

Answer: A (the price elasticity of demand is less than one)

Explanation

Demand is inelastic when quantity changes by a smaller percentage than price, i.e. elasticity is less than 1.