If the price goes up, the quantity demanded goes down (but demand itself stays the same). If the price decreases, quantity demanded increases. This is the Law of Demand.
Which is likely to occur if there is a price increase for a good which exhibits elastic demand?
Which is likely to occur if there is a price increase for a good which exhibits elastic demand? People might buy a more expensive substitute good. People might buy a less expensive complementary good.
What product is likely to have the most elastic demand?
Goods with close substitutes tend to have more elastic demand because it is easier for consumers to switch from such a good to others. In contrast, goods without close substitutes, such as a unique life-saving medicine, have a less elastic demand.
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Which of the following is likely to have the most price elastic demand?
Music downloads likely to have most price elastic demand.
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What happens to the demand curve when the price of complementary goods increases?
Changes in the price of related goods and services. When the price of complementary goods decreases, the demand curve will shift outwards. Alternatively, if the price of complementary goods increases, the curve will shift inwards. The opposite is true for substitute goods.
What happens to demand as the price decreases?
It is important to note that as the price decreases, the quantity demanded increases. The relationship follows the law of demand. Intuitively, if the price for a good or service is lower, there is a higher demand for it. From the demand schedule above, the graph can be created:
How does price elasticity affect the slope of the demand curve?
For example, in Figure 1, each point shown on the demand curve, price drops by $10 and the number of units demanded increases by 200. So the slope is –10/200 along the entire demand curve and does not change. The price elasticity, however, changes along the curve.
How is price elasticity related to pricing power?
Pricing power is linked to the price elasticity of demand. Price elasticity is a measure of the degree to which individuals, consumers, or producers change their demand or the amount supplied in response to price changes. For example, if the price of a good goes up, the tendency is that the demand for…
