Chapter 6, Problem 1P

To determine

To Explain:

The status of elasticity of demand of a car if

1. Other competing car manufactures decided to produce and sell similar cars
2. Import of similar cars is banned in the domestic market.
3. Through ads, it convinces customers that their type of car is the safest.
4. The time of measurement of elasticity is lengthened and during that time new models of other cars arrive in the market.

Concept Introduction:

Elasticity of Demand:

The degree of responsiveness of the quantity demanded in response to change in price. In other words, the percentage change in quantity demanded in response to percentage change in price is elasticity of demand.