What happens to demand if a product is elastic and prices rise?When the price elasticity of demand is relatively elastic (−∞ < Ed < −1), the percentage change in quantity demanded is greater than that in price. Hence, when the price is raised, the total revenue falls, and vice versa.
What happens to price when demand is unit elastic?Unit elastic supply is referred to as a supply that is perfectly responsive to price changes. In other words, any change in the price of a good with unit elastic supply results in an equally proportional change in quantity supplied.
What will happen to the demand for margarine if the price of butter increases?a.
Butter and margarine are substitute goods for most people. Therefore, an increase in the price of margarine will cause people to increase their consumption of butter, thereby shifting the demand curve for butter out from D1 to D2 in Figure 2.2.
What will happen to the demand for butter if the price of butter decreases?The equilibrium price and quantity of butter would decrease. If butter and margarine were not substitutes, there would be no change in the demand for butter.
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