ECONOMICS
ELASTICITY OF DEMAND
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Elastic Demand
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Unitary Elastic Demand
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Inelastic Demand
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None of the above
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Detailed explanation-1: -Elastic demand or supply curves indicate that the quantity demanded or supplied responds to price changes in a greater than proportional manner. An inelastic demand or supply curve is one where a given percentage change in price will cause a smaller percentage change in quantity demanded or supplied.
Detailed explanation-2: -If the percentage change in quantity demanded is greater than the percentage change in price, demand is said to be price elastic, or very responsive to price changes.
Detailed explanation-3: -If the price elasticity of demand is greater than 1, it is deemed elastic. That is, demand for the product is sensitive to an increase in price. A price increase for a fancy cut of steak, for example, may make many customers choose hamburger instead.
Detailed explanation-4: -Demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price, so the price elasticity is greater than 1 in absolute value. A measure of how much one economic variable responds to changes in another economic variable.
Detailed explanation-5: -When percentage change in quantity equals percentage change in price, magnitude of elasticity of demand is equal to 1. This is the situation of unit elasticity.