10. The price elasticity of demand for any good must be less than or equal to zero inless a. the good is a necessity. b. the good is a Giffen good. c. the good is a substitute. d. the good is a luxury.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
### Understanding Price Elasticity of Demand

**10. The price elasticity of demand for any good must be less than or equal to zero unless:**

   a. the good is a necessity.
   
   b. the good is a Giffen good.
   
   c. the good is a substitute.
   
   d. the good is a luxury.
   
**Explanation:**

This question deals with the price elasticity of demand, which measures how the quantity demanded of a good responds to changes in its price. Normally, most goods have a negative price elasticity of demand, implying that an increase in price leads to a decrease in quantity demanded. However, certain exceptions and categories can affect this relationship, which include:

- **Necessities:** These are goods that are essential for survival or well-being. For necessities, the demand is generally inelastic since people will buy them regardless of price changes, but they still adhere to the rule of non-positive price elasticity in typical scenarios.
  
- **Giffen Goods:** These are a rare type of goods where an increase in price leads to an increase in the quantity demanded, violating the typical law of demand. This phenomenon usually occurs when the good is an inferior good and its price increase makes the consumer unable to afford better substitutes, forcing them to buy more of the good despite the price rise.
  
- **Substitutes:** Goods that can replace each other. For such goods, when the price of one good rises, consumers might switch to its substitutes.
  
- **Luxuries:** These are high-end goods that are not necessary but are desired by consumers. Luxuries can have varying elasticities based on consumers' discretionary income.

This question and its answer options help understand the unique cases in the concept of price elasticity in economics.

#### Additional Note:

The background of the image shows part of a MacBook Air with a visible keyboard. The keys and some application icons on the computer's screen are visible above the question text, indicating the context in which the question might have been reviewed or answered.
Transcribed Image Text:### Understanding Price Elasticity of Demand **10. The price elasticity of demand for any good must be less than or equal to zero unless:** a. the good is a necessity. b. the good is a Giffen good. c. the good is a substitute. d. the good is a luxury. **Explanation:** This question deals with the price elasticity of demand, which measures how the quantity demanded of a good responds to changes in its price. Normally, most goods have a negative price elasticity of demand, implying that an increase in price leads to a decrease in quantity demanded. However, certain exceptions and categories can affect this relationship, which include: - **Necessities:** These are goods that are essential for survival or well-being. For necessities, the demand is generally inelastic since people will buy them regardless of price changes, but they still adhere to the rule of non-positive price elasticity in typical scenarios. - **Giffen Goods:** These are a rare type of goods where an increase in price leads to an increase in the quantity demanded, violating the typical law of demand. This phenomenon usually occurs when the good is an inferior good and its price increase makes the consumer unable to afford better substitutes, forcing them to buy more of the good despite the price rise. - **Substitutes:** Goods that can replace each other. For such goods, when the price of one good rises, consumers might switch to its substitutes. - **Luxuries:** These are high-end goods that are not necessary but are desired by consumers. Luxuries can have varying elasticities based on consumers' discretionary income. This question and its answer options help understand the unique cases in the concept of price elasticity in economics. #### Additional Note: The background of the image shows part of a MacBook Air with a visible keyboard. The keys and some application icons on the computer's screen are visible above the question text, indicating the context in which the question might have been reviewed or answered.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Elasticity of demand
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education