Refer to Table 5-1. Which of the following statements is consistent with the elasticities given in Table 5-1?

• A. A good with an elasticity less than 1 is considered elastic, meaning quantity demanded responds strongly to price changes.
• B. A good with an elasticity greater than 1 is considered elastic, meaning quantity demanded responds strongly to price changes.
• C. A good with an elasticity greater than 1 is considered inelastic, meaning quantity demanded responds weakly to price changes.
• D. A good with an elasticity equal to 1 is considered perfectly elastic.

Answer: (B)

Verified step by step guidance

1. Recall the definition of price elasticity of demand, which measures how much the quantity demanded of a good responds to a change in its price. It is calculated as \(\text{Elasticity} = \frac{\% \text{ change in quantity demanded}}{\% \text{ change in price}}\).
2. Understand the classification of elasticity values: if elasticity is greater than 1, demand is elastic (quantity demanded changes more than price); if elasticity is less than 1, demand is inelastic (quantity demanded changes less than price); if elasticity equals 1, demand is unit elastic (quantity demanded changes proportionally to price).
3. Evaluate each statement by comparing it to these definitions: check if the statement correctly associates elasticity values with the terms elastic, inelastic, or unit elastic, and the corresponding strength of quantity response to price changes.
4. Identify the correct statement by confirming that a good with elasticity greater than 1 is indeed considered elastic, meaning quantity demanded responds strongly to price changes.
5. Recognize that statements claiming elasticity less than 1 is elastic, or elasticity greater than 1 is inelastic, or elasticity equal to 1 is perfectly elastic, contradict the standard economic definitions and are therefore incorrect.