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For a particular good, an 8 percent increase in price causes a 12 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good? a. The market for the good is broadly defined. b. There are no close substitutes for this good. c. The good is a necessity. d. The relevant time horizon is long.

Respuesta :

Answer:

The correct answer is option a.

Explanation:

An 8 percent increase in price will lead to a 12% decrease in quantity demanded.

The elasticity of demand shows the degree of change in quantity demanded because of change in price of commodity.

It is calculated by the ratio of proportionate change in quantity demanded to proportionate change in price.

Here, the elasticity of demand is

=[tex]\frac{-12}{8}[/tex]

= -1.5

This shows that demand is relatively elastic.

So, we can say that the market is broadly defined.

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