ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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0
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1
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>1
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<1
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Detailed explanation-1: -If a good’s price elasticity is 0 (no amount of price change produces a change in demand), it is perfectly inelastic.
Detailed explanation-2: -A product with an elasticity of 0 would be considered perfectly inelastic, because price changes have no impact on demand. Many household items or bare necessities have very low price elasticity of demand, because people need these items regardless of price. Gasoline is an excellent example.
Detailed explanation-3: -When the demand of a quantity does not change as a result of a change in the price of a commodity, the demand of that commodity is called a perfectly inelastic demand. In this case, the elasticity of demand is zero.
Detailed explanation-4: -If the cross elasticity of demand is less than zero, the two goods are said to be complementary. For example, toothpaste is an example of a substitute good. If the price of one brand of toothpaste increases, the demand for another brand increases as well.
Detailed explanation-5: -The given statement is False. If the price elasticity of demand is zero, the demand will not change at any level of price. The change in price will have a direct bearing on the total revenues.