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The price elasticity of demand measures 0.4. Which of the following statements is correct? Choose one:...

The price elasticity of demand measures 0.4. Which of the following statements is correct?

Choose one:

a. The product in question is a substitute.

b. The product in question is a luxury product.

c. This is unit elasticity.

d. The product in question is a necessity.

e. The product in question is inferior good.

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Answer #1

Solution: The product in question is a necessity

Exp;anation: The normal necessities elasticity of demand is positive however less than 1. Inferior goods usually have negative income elasticity of demand. Theluxury goods elasticity of demand would exceed one

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