Demand Elasticity of Hot Dogs

Demand elasticity refers to the extent to which the demand for a product changes in response to a change in its price. Elasticity can be classified into three categories: elastic demand, inelastic demand, and unitarily elastic demand.

Given that the price of hot dogs increased by 22% and the quantity demanded fell by 25%, we can conclude that the demand for hot dogs is elastic.

Explanation

To understand why this is the case, let's break it down:

1. Elastic Demand

When demand is elastic, a small change in price leads to a relatively larger change in the quantity demanded. In other words, consumers are highly responsive to changes in price. This typically occurs when there are many substitutes available, and consumers can easily switch to a competitor's product if the price of the original product increases.

2. Price Increase

In this case, the price of hot dogs increased by 22%. This means that hot dogs are now more expensive than they were before.

3. Quantity Demanded Falls

As a result of the price increase, the quantity demanded of hot dogs fell by 25%. This means that consumers are choosing to buy fewer hot dogs than they were before, presumably because they are too expensive.

4. Elastic Demand Explanation

The fact that the quantity demanded fell by a larger percentage than the price increased indicates that the demand for hot dogs is elastic. In other words, consumers are highly responsive to changes in price, and are choosing to buy fewer hot dogs now that the price has increased.

Conclusion

In conclusion, the price of hot dogs increased by 22% and the quantity of hot dogs demanded fell by 25%, indicating that the demand for hot dogs is elastic. This means that consumers are highly responsive to changes in price and will choose to buy fewer hot dogs if the price increases.