The correct answer is: A. Larger the resulting price change for a given increase in supply.
The price elasticity of demand is a measure of how responsive consumers are to changes in price. A higher price elasticity of demand means that consumers are more sensitive to changes in price, and a lower price elasticity of demand means that consumers are less sensitive to changes in price.
When the price elasticity of demand is high, a small change in price will lead to a large change in demand. This is because consumers are very sensitive to changes in price, and they will buy less of the product when the price goes up.
When the price elasticity of demand is low, a large change in price will lead to a small change in demand. This is because consumers are not very sensitive to changes in price, and they will continue to buy the product even when the price goes up.
The price elasticity of demand is important for businesses because it affects how much they can charge for their products. If the price elasticity of demand is high, businesses will have to charge a lower price in order to sell their products. If the price elasticity of demand is low, businesses can charge a higher price for their products.
The price elasticity of demand is also important for governments because it affects how much tax revenue they can collect. If the price elasticity of demand is high, governments will collect less tax revenue when they raise taxes. If the price elasticity of demand is low, governments will collect more tax revenue when they raise taxes.
Here is a brief explanation of each option:
- Option B: More rapid the rate at which the marginal utility of that product diminishes. This is not necessarily true. The price elasticity of demand is a measure of how responsive consumers are to changes in price, while the marginal utility of a product is a measure of how much satisfaction consumers get from consuming one more unit of the product. These two concepts are not related.
- Option C: Less competitive will be the industry supplying that product. This is also not necessarily true. The price elasticity of demand is a measure of how responsive consumers are to changes in price, while the competitiveness of an industry is a measure of how many firms there are in the industry and how easy it is for new firms to enter the industry. These two concepts are also not related.
- Option D: Smaller the resulting price change for a given increase in supply. This is the opposite of what is true. The larger the price elasticity of demand, the larger the resulting price change for a given increase in supply.