Discussion
If the demand for a product responds more than proportionate to the change in its price, it is a :
Answer: D
It is highly elastic demand.
Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. When quantity responds more than proportionately, the elasticity is greater than 1, which is described as relatively or highly elastic demand. A 10 per cent cut in price raising sales by 25 per cent is an example.
Unitary elastic demand responds exactly in proportion (elasticity equal to 1). Perfectly elastic demand (infinite elasticity) and perfectly inelastic demand (zero elasticity) are the two theoretical extremes, not a response 'more than proportionate'.
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