ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Relatively inelastic
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Relatively elastic
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Perfectly elastic
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Perfectly inelastic
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Detailed explanation-1: -The demand for a good is inelastic if the percentage decrease in the quantity demanded is less than the percentage increase in its price. In this example, a 10 percent price rise brings a 2 percent decrease in the quantity demanded, so demand is inelastic.
Detailed explanation-2: -Inelastic demand occurs when changes in price cause a disproportionately small change in quantity demanded. For example, a good with inelastic demand might see its price increase by 30%, but demand falls by only 10% as a result.
Detailed explanation-3: -Perfectly Elastic (PED > 1) If the percentage of change in demand is more than the percentage of change in price, then the demand is perfectly elastic. For instance, if a 10% increase in price causes a 20% drop in demand, then the coefficient of PED is 3, which means that the demand is perfectly elastic.
Detailed explanation-4: -When the price of a good rises from Rs. 10 per unit to Rs. 12 per unit, its quantity demanded falls by 20 per cent.