question archive The owner of Mr
The owner of Mr
Subject:EconomicsPrice:2.88 Bought3
The owner of Mr. Piggy's Bacon estimates that the price elasticity of demand for a package of their bacon to be 3.48. In relation to the price elasticity of demand for the entire bacon market, which of the following is most likely true?
A) The price elasticity for all bacon will be more responsive to price changes.
B) The price elasticity for all bacon will be less responsive to price changes.
C) The price elasticity for all bacon will be more elastic.
D) The price elasticity for all bacon will be greater than 3.48 (absolute value).
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- B. The price elasticity for all bacon will be less responsive to price changes .
The price elasticity of demand depends on how the market is defined. For a narrowly defined market, that is, package of bacon, the price elasticity of demand tends to be elastic (more responsive to price changes). On the other hand, for a broadly defined market, that is, the entire bacon market, the price elasticity of demand tends to be inelastic (less responsive to price changes).
