ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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· 0.25·
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2
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·5· ·
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0.2
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Detailed explanation-1: -Therefore, if a 30% increase in the price causes a 15% decrease in the quantity demanded, then this would give a price elasticity of demand equal to 0.5 in absolute terms.
Detailed explanation-2: -Hence, when the price is raised, the total revenue falls, and vice versa. When the price elasticity of demand is perfectly elastic (Ed is − ∞), any increase in the price, no matter how small, will cause the quantity demanded for the good to drop to zero. Hence, when the price is raised, the total revenue falls to zero.
Detailed explanation-3: -If a 10 percent increase in price results in a 20 percent drop in demand, then the elasticity coefficient will be 20/10 = 2.0. Or if a 15 percent increase in price results in a 10 percent decline in quantity demanded, then the elasticity coefficient will be 15/10 = 0.67.
Detailed explanation-4: -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.