ECONOMICS (CBSE/UGC NET)

ECONOMICS

ELASTICITY OF DEMAND

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Electricity has seen a decrease in demand of 14%, while the price has increased 18%
A
1.3 inelastic
B
1.3 elastic
C
.78 inelastic
D
.78 elastic
Explanation: 

Detailed explanation-1: -In case of perfectly inelastic demand the change in price will have no effect on the quantity demanded.

Detailed explanation-2: -The PED of a product is determined by the responsiveness of quantity demanded in relation to changes in price, and can be described as: 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.

Detailed explanation-3: -a) If demand is price inelastic, then increasing price will decrease revenue.

Detailed explanation-4: -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.

There is 1 question to complete.