Answer
A. The price-elasticity coefficient is less than 1 – This is incorrect because price-elasticity coefficient of less than 1 means the demand is less sensitive to price changes which is the case when demand is inelastic and not elastic.
Explanation
Elasticity is an economic concept that measures how responsive consumers are to changes in the price of a product or service. It is calculated as the percentage change in quantity demanded of a product divided by the percentage change in the product's price. This ratio is expressed as a numerical value, which indicates the degree to which the quantity demanded of the product responds to changes in its price.
When demand is elastic, a small change in price leads to a proportionately larger change in quantity demanded. This means that consumers are highly sensitive to price changes and will alter their purchasing behavior significantly in response to even a small change in price. When the elasticity of demand is greater than 1, the demand is considered price elastic, meaning that a change in price has a significant impact on the quantity demanded.
On the other hand, when demand is inelastic, a change in price leads to only a small change in the quantity demanded. In other words, consumers are not very sensitive to price changes, and their purchasing behavior is unlikely to change significantly in response to price fluctuations. When the elasticity of demand is less than 1, the demand is considered inelastic.
When the elasticity of demand is exactly 1, the demand is unitary elastic. This means that a change in price leads to a proportionate change in the quantity demanded. For example, if the price of a product increases by 10%, the quantity demanded will decrease by 10%.
In general, when demand is elastic, increasing the price of a product will lead to a decrease in total revenue because consumers are highly sensitive to price changes and will reduce their purchases significantly in response. Conversely, when demand is inelastic, increasing the price of a product may lead to an increase in total revenue because consumers are not very sensitive to price changes and will continue to purchase the product even at higher prices.
