ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Equal to 1.
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Greater than 1.
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Less than 1.
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Greater than 0.
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Detailed explanation-1: -If the cross elasticity of demand of goods is greater than zero, the goods are said to be substitutes. With goods that have a cross elasticity of demand equal to zero, the two goods are independent of each other.
Detailed explanation-2: -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-3: -If elasticity = 0, then it is said to be ‘perfectly’ inelastic, meaning its demand will remain unchanged at any price. There are probably no real-world examples of perfectly inelastic goods.
Detailed explanation-4: -When elasticity is less than zero, it means that the value is negative. Inferior goods are those goods whose income elasticity is less than zero. When income increases, then the demand for goods automatically got declines.
Detailed explanation-5: -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.