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30 March, 13:41

An increase in the price of flash drives leads to an increase in total expenditures on the flash drives. Which of the following is true for this price change? a. The demand for flash drives is elastic. b. flash drives are an inferior good. c. The demand for flash drives is inelastic. d. The demand for flash drives is perfectly elastic.

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  1. 30 March, 14:05
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    The correct answer is letter "C": The demand for flash drives is inelastic.

    Explanation:

    Elasticity refers to the characteristics of goods or services that change the quantity demanded as a result of price fluctuations. Demand elasticity is determined by dividing the percentage change in quantity demanded by the percentage change in price. If the result is lower than one (1) the demand is inelastic implying changes in price do not change the quantity demanded of the good or service.

    In the example, if the increase in the price of flash drives increases the expenditures on flash drives means that people are using more resources of their income to spend it on flash drives, thus, the quantity demanded for flash drives has remained the same or almost the same in front of the raise of prices. Therefore, the demand for flash drives is inelastic.
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