ACCA Certification Practice Test 2026 – All-in-One Guide to Secure Your Chartered Success!

The elasticity of demand specifically gauges how sensitive consumers are to changes in price. When discussing this concept, we refer to the percentage change in quantity demanded in relation to a percentage change in price. If a small change in price leads to a significant change in the quantity demanded, the demand is considered elastic. Conversely, if a change in price has little effect on demand, it is inelastic. This responsiveness is crucial for businesses and policymakers to understand because it helps in pricing strategies, budget decisions, and estimating the effects of market changes.

The other choices relate to different economic concepts. For instance, the first choice discusses how income influences demand, which pertains to income elasticity rather than price elasticity. The third option addresses production limits influenced by resource availability, which is related to supply rather than demand. The fourth choice regarding consumer preferences fluctuating over time ties more closely to consumer behavior and market trends, rather than the immediate pricing effects captured by demand elasticity.