ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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PED =-1.33
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PED =-0.75
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PED =-7.5
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PED =-1.75
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Detailed explanation-1: -If the price elasticity of demand is . 75 (i.e. 3/4), it means the % change in quantity demanded is lower or less than the % change in price (demand is inelastic or less than 1). In other words, quantity demanded is less responsive to changes in price for this good.
Detailed explanation-2: -If the percent change in a good’s price is offset by an equal percent change in the quantity demanded, economists would label the demand for that good as unit elastic. So if a price of a good increases by 20 percent and the quantity demanded decreases by 20 percent, the demand for that good is considered unit elastic.
Detailed explanation-3: -If a 15% increase in price for a good results in a 20% decrease in quantity demanded, the price elasticity of demand is: 0.75.
Detailed explanation-4: -Answer and Explanation: We will use elasticity of demand equation to calculate the change in goods demanded. 10 % decrease in the price will result into 7.5 % change in goods demanded.