alleryStart learning →A 10 percent increase in the price of housing causes what change in the quantity of housing demanded?
ANo change in quantity at all
BA slight decrease of about 1.2 percent
CA decrease of about 22.7 percent
DAn increase of about 1.2 percent
Answer & Solution
Correct answer: B. A slight decrease of about 1.2 percent
1. Housing has a demand elasticity of only 0.12, which is highly inelastic.
2. A highly inelastic good responds only weakly to a price change.
3. A 10 percent price increase causes only a slight, 1.2 percent decrease in quantity demanded.
4. The much larger 22.7 percent figure belongs to restaurant meals, the most elastic good in the same table, not to housing.
_Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 5 "Elasticity", section 5.3 | Elasticity and Pricing_
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