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Todd sells facial cream. Todd knows that a 4% increase in the price of facial cream...

Todd sells facial cream. Todd knows that a 4% increase in the price of facial cream will reduce the quantity of facial cream demanded by 3%. Based on this information, Todd determines that the demand for facial cream is

- elastic

- inelastic

- unit elastic

- perfectly elastic

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Answer #1

Answer : The answer is option B.

Elasticity of demand (E) = % changes in quantity demanded / % changes in price level

=> E = 3 / 4 = 0.75

As here the elasticity of demand is less than 1 hence the demand for facial cream is inelastic. Therefore, option B is correct.

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