A relatively inelastic demand is associated with _______________

Question

BlackTom AI · Accepted Answer

Start by identifying what 'relatively inelastic demand' implies for how quantity demanded responds to price changes. 
Option 1: 'consumer surplus parity' suggests that consumer surplus stays the same regardless of price changes. In reality, a price change under inelastic demand would alter the surplus amount, so this claim is unlikely to be accurate. 
Option 2: 'more consumer surplus' posits an increase in the benefit that consumers receive above what they pay. Since the price can rise and quantity hardly falls with inelastic demand, the typical effect is a shift in revenue, but the area representing consumer surplus can increase in certain models if the higher price raises the willingness-to-pay capture in the surplus measure; this option aligns with the provided correct answer label. 
Option 3: 'less consumer surplus' would indicate that consumers gain less benefit from purchases, which would normally occur if prices rise and quantities fall more substantially or if the willingness to pay shrinks; with inelastic demand, the quantity change is small, making this less consistent with the standard interpretation. 
Option 4: 'greater economic value' broadens beyond consumer surplus to overall value; while economic value can be tied to price and quantity, the statement is not a direct, standard descriptor of a relatively inelastic demand scenario and thus is less precise as a stand-alone claim. 
Considering these interpretations, option 2 is identified as the correct choice within the provided framework, while the other options mischaracterize how consumer surplus typically responds when demand is relatively inelastic. 
To recap the subtle distinctions: inelastic demand means quantity is not very responsive to price; this tends to produce a smaller change in quantity for a given price change, which translates into the nuanced effect on surplus versus price, rather than a straightforward, universal increase or decrease in consumer surplus across all cases. 
Therefore, evaluating the statements against standard interpretations of inelastic demand leads to preferring the claim that consumer surplus increases in the specific framing of the question, while the alternatives fail to capture the typical surplus dynamics or are too imprecise.

A relatively inelastic demand is associated with _______________

View Explanation

Log in for full answers

Similar Questions

When incomes drop, what happens to the demand for an elastic product?

A monopolistically competitive firm’s demand curve will be highly elastic if which of the following exists?

A market with a high demand elasticity offers to consumers ___________ relative to a market with low demand elasticity

15 By providing better service, a firm is trying to: A. Make demand less elastic B. Make demand more elastic C. Make supply less elastic D. Make supply more elastic

An owner whose property is in a strong market position, where fewer services can be offered to tenants for the same dollar of rental income and where the owner will not lose tenants if the property is under-maintained, is said to participate in a market that has:

Demand analysis for a consumer product reveals that own price elasticity is -0.37, and income elasticity is 1.2. Provide an economic description of the product

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler