ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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.42 inelastic
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.42 elastic
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2.4 inelastic
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2.4 elastic
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Detailed explanation-1: -In case of perfectly inelastic demand the change in price will have no effect on the quantity demanded.
Detailed explanation-2: -If demand is elastic, then a price increase reduces the total revenue. When the price increases, then the demand falls by a considerable percentage. Then, total revenue starts moving in contradictory directions. Therefore, total income declines when the price of any commodity rises.
Detailed explanation-3: -b) If demand is price elastic, then decreasing price will increase revenue.
Detailed explanation-4: -On the other hand, if the price for an inelastic good is increased and the demand does not change, the total revenue increases due to the higher price and static quantity demanded. However, price increases typically do lead to a small decrease in quantity demanded.