If the demand for a product increases in an increasing cost ...

[fnuegbu]

If the demand for a product increases in an increasing cost industry, as the market adjusts in the long run:
 a. price will rise.
  b. the firm's per-unit cost will increase.
  c. the firm's per-unit cost will fall.
  d. the market price will return to its initial position.

Question 2

What does the price elasticity of demand measure? What does a price elasticity of demand coefficient of 1.2 mean? Does the product have an elastic, unitary elastic or inelastic demand?

[jasonq]

Answer to Question 1

b

Answer to Question 2

The price elasticity of demand measures buyer responsiveness to a price change. If the price elasticity of demand coefficient equals 1.2, this means that for every 1 percent change in price there will be a 1.2 percent change in the quantity demanded in the opposite direction. This implies that consumers are relatively responsive to a change in the price and therefore the demand for this product is elastic.

[fnuegbu]

Thanks for the timely response, appreciate it

[rachel]

TYSM