Future Business Leaders of America (FBLA) Hospitality Management Practice Test

What term describes the variation of consumer demand due to a change in price?

1. Market adjustment

2. Price elasticity

3. Demand fluctuation

4. Supply shift

The correct answer is: Price elasticity

The term that describes the variation of consumer demand due to a change in price is price elasticity. This concept refers to the responsiveness of the quantity demanded of a good or service to a change in its price. When the price of a product increases, the demand for it may decrease, and conversely, if the price decreases, the demand might increase. Price elasticity helps businesses understand how sensitive consumers are to price changes, allowing them to set pricing strategies accordingly. In contrast, market adjustment refers to the broader processes within a market that equilibrate supply and demand but does not specifically focus on the relationship between price changes and demand variation. Demand fluctuation is a more general term that does not necessarily specify that the changes are directly attributed to price changes. Supply shift pertains to changes in the availability of goods or services in a market, which is related to supply rather than directly addressing how demand is affected by price changes. Thus, price elasticity specifically captures the phenomenon being described in the question.