ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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equal to 0
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greater than-1 but less than 0
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equal to-1
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greater than 1
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Detailed explanation-1: -If the income elasticity of demand is greater than one, the good would probably be a luxury since the luxury experiences a relatively elastic demand.
Detailed explanation-2: -Demand is described as elastic when the computed elasticity is greater than 1, indicating a high responsiveness to changes in price. Computed elasticities that are less than 1 indicate low responsiveness to price changes and are described as inelastic demand.
Detailed explanation-3: -If the formula creates an absolute value greater than 1, the demand is elastic. In other words, quantity changes faster than price. If the value is less than 1, demand is inelastic.
Detailed explanation-4: -If price elasticity is greater than 1, the good is elastic; if less than 1, it is inelastic. If a good’s price elasticity is 0 (no amount of price change produces a change in demand), it is perfectly inelastic.
Detailed explanation-5: -An elastic demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small. If the formula creates an absolute value greater than 1, the demand is elastic.