Alyssas Floral Shoppe dropped its prices for a dozen roses from textsterling45 to textsterling35 this year. Because of this decrease in price, the quantity sold increased from 1000 to 1500. The price elasticity of demand for Alyssas roses is:

ELASTICITY OF DEMAND

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Alyssa’s Floral Shoppe dropped its prices for a dozen roses from £45 to £35 this year. Because of this decrease in price, the quantity sold increased from 1000 to 1500. The price elasticity of demand for Alyssa’s roses is:

A	1.00.
B	1.6.
C	0.625.
D	2.25

Explanation:

Detailed explanation-1: -The price elasticity of demand evaluates the responsiveness of consumers to changes in the price of a product. In other words, it measures how the quantity demanded of a given good or service reacts to the price change. If the change in quantity is greater than the price change, we say the demand is elastic.

Detailed explanation-2: -The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price.

Detailed explanation-3: -In case of perfectly inelastic demand the change in price will have no effect on the quantity demanded. The consumers do not change their demand due to the change in price. This usually is seen in case of necessities. Hence, the equilibrium quantity will be same the price might increase or decrease.

Detailed explanation-4: -Using Elasticity for Pricing Decisions For elastic products, reduce prices to drive more sales volume. This will also improve your price perception in the market. With inelastic products, increase your prices to drive higher margins with limited impact on units sold.

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ECONOMICS (CBSE/UGC NET)

ECONOMICS

ELASTICITY OF DEMAND