ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A 5% fall in price of a good results in 10% rise in its demand .Calculate Ed
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-1
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-3
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-2
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-5
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Explanation:
Detailed explanation-1: -Thus, the answer is (d). A 10 percent increase in the price will cause a 5 percent decrease in the quantity demanded.
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: -When the price of a good rises from Rs. 10 per unit to Rs. 12 per unit, its quantity demanded falls by 20 per cent.
Detailed explanation-4: -So, if the price of a good increases by 10 percent and the quantity demanded decreases by only 5 percent, that good is said to have inelastic demand.
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