ECONOMICS (CBSE/UGC NET)

ECONOMICS

ELASTICITY OF DEMAND

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
A given percentage change in price leads to a large percentage change in quantity demanded (Greater than 1)
A
Elastic Demand
B
Unitary Elastic Demand
C
Inelastic Demand
D
None of the above
Explanation: 

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.

There is 1 question to complete.