Suppose that a jewelry store found that when it increased prices by 10 percent, sales revenue increased by 3 percent. Which of the following is true about the price elasticity of demand for the store's goods?

Question

Jaydon Galloway

Business

22 January, 06:39

Suppose that a jewelry store found that when it increased prices by 10 percent, sales revenue increased by 3 percent. Which of the following is true about the price elasticity of demand for the store's goods?

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Answers (1)

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Nicolas Porter · Answer 1

The correct answer is Demand is inelastic, but not perfectly.

Explanation:

Inelastic demand is that demand that is not very sensitive to a change in price. In this way, before a variation in the price the quantity demanded reacts in a less than proportional way. For example, if the price increases by 10% and in response the quantity demanded is reduced by less than 10%, then the demand is said to be inelastic.

The elasticity of demand, also known as the elasticity-price of demand, is defined as the percentage change of the quantity demanded before a percentage change in the price.