ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The change in demand is more than the change in price
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The change in demand is less than the change in price
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A change in price leads to a proportionate change in demand
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A change in price causes a complete stop to demand
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Detailed explanation-1: -1.2 Elasticities: Price elasticity of demand. This means that a small percentage change in price causes a large percentage change in quantity demanded. This is usual for luxury goods with many substitutes, such as ferraris, gucci bags and superyachts.
Detailed explanation-2: -What Does a Price Elasticity of 1.5 Mean? If the price elasticity is equal to 1.5, it means that the quantity of a product’s demand has increased 15% in response to a 10% reduction in price (15% / 10% = 1.5).
Detailed explanation-3: -Quantity of demand. An elasticity of-1.25 means that for every 1% increase in price, the quantity demanded decreases by 1.25%. Elasticity is generally negative, the higher the price the lower the quantity demanded. Therefore, it is usually spoken of in absolute terms.
Detailed explanation-4: -Elastic demand: PED greater than 1 means the product has elastic demand. Elastic demand indicates that the product’s demand changes more than the price changes. When a product is elastic, it signals that revenue falls when you increase the price and rises when you decrease the price.