ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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0
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> 1
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< 1
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None of the above
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Detailed explanation-1: -If the number is equal to 1, elasticity of demand is unitary. In other words, quantity changes at the same rate as price.
Detailed explanation-2: -If price elasticity is exactly 1 (price change leads to an equal percentage change in demand), it is known as unitary elasticity. The availability of a substitute for a product affects its elasticity.
Detailed explanation-3: -The price elasticity of demand is calculated by dividing the percentage change in quantity demanded by the percentage change in price. If the quotient is greater than or equal to one, the demand is considered to be elastic. If the value is less than one, demand is considered inelastic.
Detailed explanation-4: -If elasticity is greater than 1, the curve is elastic. If it is less than 1, it is inelastic. If it equals one, it is unit elastic.
Detailed explanation-5: -Elastic (when elasticity of demand is less than-1; for example, -2 or even just-1.1 ): In this case, an increase in price by 1% leads to more than 1% drop in volume. It often means you should “price low”.