Question

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie Avengers: Endgame should be:

a) equal to 1 in absolute value.

b) less then 0.8 in absolute value.

c) greater than 0.8 in absolute value.

d) equal to zero because the DVD of this movie has been out for several years.

Answer 1

c) greater than 0.8 in absolute value.

Explanation:

If the absolute value of the price elasticity of demand for DVD movies is 0.8 then the elasticity of demand of the DVD for the movie Avengers: Endgame should be greater than 0.8 in absolute terms.The price elasticity of demand states the measure of change in quantity demanded and its relation with change in price.The absolute value of price elasticity of demand is more in presence or availability of substitues and it also depends on importance of product in household budget or time which buyers take adjusting to changes caused if any in price of commodities or goods.In this case,fewer substitutes of DVDs are available in general and all other DVDs are potential substitues for the movie Avengers:Endgame.