ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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0.3
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-0.3
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3
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-3.3
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Detailed explanation-1: -Inelastic demand occurs when changes in price cause a disproportionately small change in quantity demanded. For example, a good with inelastic demand might see its price increase by 30%, but demand falls by only 10% as a result.
Detailed explanation-2: -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-3: -When a 5% increase in income causes a 3% drop in quantity demanded of a good: a. the income elasticity is 0.6 and the good is an inferior good.
Detailed explanation-4: -Elastic Demand Note that a change in price results in a large change in quantity demanded. An example of products with an elastic demand is consumer durables.