Arizona State University (ASU) ECN212 Microeconomic Principles Exam 1 Practice

The correct answer revolves around the concept of price elasticity of demand, which measures how quantity demanded responds to changes in price. For this calculation to be meaningful, the prices at different times need to be compared under conditions where other influencing factors remain unchanged.

The statement that the price of corn is the same between July and June implies that there is no variation in price to analyze, which contradicts the fundamental aspect of calculating elasticity. Price elasticity requires comparing quantities demanded at different prices to see how responsive demand is to price changes. If the price does not vary over a given period, then there is no elasticity to measure, as the quantity demanded cannot respond to a nonexistent price change.

In contrast, having a variable price of corn, changes in the quantity demanded, and holding other factors constant are all necessary conditions for accurately assessing price elasticity. These conditions allow for a valid analysis of how consumers react to changes in price, which is the core focus of elasticity measures. Thus, the existence of varying prices is essential for calculating price elasticity of demand effectively.