ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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True
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False
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Either A or B
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None of the above
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Detailed explanation-1: -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. The formula for computing elasticity of demand is: (Q1 – Q2) / (Q1 + Q2)
Detailed explanation-2: -The four factors that affect price elasticity of demand are (1) availability of substitutes, (2) if the good is a luxury or a necessity, (3) the proportion of income spent on the good, and (4) how much time has elapsed since the time the price changed. If income elasticity is positive, the good is normal.
Detailed explanation-3: -Elasticity of demand can help a business predict how much revenue a product will generate under certain market circumstances. Knowing how much money your business might make given a specific price point can help you make informed decisions about prices and products.
Detailed explanation-4: -The cost of production cannot affect the elasticity of demand because it is considered a factor that affects the elasticity of supply. When the price of a particular product is increased, it will also increase its production cost.