ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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1/3.
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6. .
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2 .
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3.
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Detailed explanation-1: -2. Suppose that a 2% increase in price results in a 6% decrease in quantity demanded. Own-price elasticity of demand is equal to: a) 1/3.
Detailed explanation-2: -The correct option is c) elastic. Here, the change in quantity demanded is 6% and the change in price is 5%. Therefore, the ratio of 6/5 gives us 1.2, which indicates that the demand for the commodity is elastic.
Detailed explanation-3: -If a 2% price rise results in a 4% decrease in quantity demanded, then (c) demand is elastic, and its total revenue decreases. When a product experiences a drastic change in the demand with a minimal price change, the demand for the product is said to be elastic.
Detailed explanation-4: -The demand for a good is inelastic if the percentage decrease in the quantity demanded is less than the percentage increase in its price. In this example, a 10 percent price rise brings a 2 percent decrease in the quantity demanded, so demand is inelastic.
Detailed explanation-5: -An elastic demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small. If the formula creates an absolute value greater than 1, the demand is elastic.