An increase in the price of flash drives leads to an increase in total expenditures on the flash drives. Which of the following is true for this price change? a. The demand for flash drives is inelastic. b. The demand for flash drives is elastic. c. The demand for flash drives is perfectly elastic. d. flash drives are an inferior good.

The correct answer is letter "A": The demand for flash drives is inelastic.

Explanation:

Elasticity refers to the characteristic of goods or services to change in quantity demanded in front of fluctuations in price. The demand elasticity is calculated by dividing the percentage change in quantity demanded by the percentage change in price. If the result is lower than one (1) the demand is inelastic implying changes in price do not change the quantity demanded of the good or service.

Then, if the increase in the price of flash drives increases the expenditures on flash drives means that people are using more resources of their income to spend it on flash drives, thus, the quantity demanded for flash drives has remained the same or almost the same in front of the raise of prices. So, the demand for flash drives is inelastic.

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