Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is

Question

Assume that when the price of cantaloupes is $2.50 the demand for cantaloupes is unit-elastic, and that the demand curve for cantaloupes is linear and downward sloping. If firms lower the price of cantaloupes to $2.00 which of the following statements can be made regarding the price elasticity of demand for cantaloupes? The demand for cantaloupes at $2.00 must be inelastic. We cannot determine whether the demand for cantaloupes is elastic or inelastic without knowing what the quantity demanded is at each price. The demand for cantaloupes at $2.00 must be elastic. The demand for cantaloupes at $2.00 must be unit-elastic.

Explanation / Answer

We cannot determine whether the demand is elastic or inelastic without knowing the what the quantity demanded at each price.

Because elasticity of demand is generally the responsiveness or sensitiveness of demand to a given change in the price of a commodity, i.e., Ep=Percentage change inquantity demanded / Percentage change in price.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---