BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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inelastic
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elastic
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unitary elastic
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none of the above
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Detailed explanation-1: -Demand for a good is said to be elastic when the elasticity is greater than one. A good with an elasticity of −2 has elastic demand because quantity falls twice as much as the price increase; an elasticity of −0.5 has inelastic demand because the quantity response is half the price increase.
Detailed explanation-2: -If the price elasticity of supply is 0.5, a 10 percent increase in price will cause a 5 percent increase in quantity supplied.
Detailed explanation-3: -A score between 0 and 1 is considered inelastic, since variation in price has only a small impact on demand. A product with an elasticity of 0 would be considered perfectly inelastic, because price changes have no impact on demand.
Detailed explanation-4: -Price Elasticity of Demand = 0.5 / 0.25 = 0.2 Since the elasticity of demand is less than 1, the commodity has inelastic demand.