ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Detailed explanation-1: -A decline in the price of good X by Rs. 5 causes an increase in its demand by 20 units to 50 units. The new price is X 15.
Detailed explanation-2: -Expert-Verified Answer ∴ The price elasticity of demand decreases by 1.33.
Detailed explanation-3: -Answer and Explanation: The correct answer choice is B. Demand is said to be price elastic when the value of price elasticity is greater than one. Here, the given percentage change in quantity demanded is 15, while the given percentage change in price is 10 implying that the price elasticity of demand is 1.5.
Detailed explanation-4: -And the inelastic demand is the change in demand is small due to the change in price. Here we can see that the price falls by 5% and the demand increases by 6% so we cans ay that the demand is elastic. Hence, the correct answer is “elastic".