Certified Supply Chain Professional (CSCP) Practice Exam

Which of the following characteristics applies to elastic demand?

1. Consumers are highly responsive to price changes

2. Price changes have little effect on quantity demanded

3. Demand remains constant despite price fluctuations

4. All consumers buy regardless of price changes

The correct answer is: Consumers are highly responsive to price changes

Elastic demand refers to a situation in which consumers show a significant response to changes in price. When demand is elastic, even a small increase in price can lead to a relatively larger decrease in the quantity demanded, and vice versa. This characteristic indicates that consumers are sensitive to price changes; they are likely to adjust their purchasing behavior based on fluctuations in price. In markets with elastic demand, consumers may have readily available substitutes or perceive the products as non-essential, which contributes to their willingness to reduce consumption when prices rise. This understanding of consumer behavior is critical for businesses when setting pricing strategies and anticipating sales volumes in response to price changes. Recognizing this aspect of elastic demand is essential for effective supply chain management, as it influences inventory levels, production planning, and market responsiveness.