BUSINESS ADMINISTRATION
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Price of a product falls by 10% and its demand rises by 30%. The elasticity of demand is:
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1. 1%
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2.5%
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3. 3
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4. 1
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Explanation:
Detailed explanation-1: -Answers. Price of a product falls by 10% and its demand rises by 30%. The elasticity of demand is 3.
Detailed explanation-2: -Solution(By Examveda Team) The elasticity of demand is 3.
Detailed explanation-3: -Therefore, the ratio of 6/5 gives us 1.2, which indicates that the demand for the commodity is elastic. The elasticity of 1.2 is assertive of the fact that when the price of the commodity falls by 5% there is an increase in demand of the commodity by 1.2 units (following the inverse relationship by the law of demand).
Detailed explanation-4: -So, if the price of a good increases by 10 percent and the quantity demanded decreases by only 5 percent, that good is said to have inelastic demand.
There is 1 question to complete.