ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Price elastic
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Perfectly price elastic
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Unitary price elastic
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Price inelastic
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Detailed explanation-1: -If price elasticity is greater than 1, the good is elastic; if less than 1, it is inelastic.
Detailed explanation-2: -Demand for a good is said to be elastic when the elasticity is greater than one. A good with an elasticity of −2 has elastic demand because quantity falls twice as much as the price increase; an elasticity of −0.5 has inelastic demand because the quantity response is half the price increase.
Detailed explanation-3: -The elasticity of demand is 0.4 (elastic).
Detailed explanation-4: -A PED coefficient equal to zero indicates perfectly inelastic demand. This means that demand for a good does not change in response to price.
Detailed explanation-5: -Demand is inelastic. Price elasticity of demand for agricultural products is 0.4. So a 1 percent decrease in the quantity harvested will lead to a 2.5 percent rise in the price. Demand is inelastic and farmers’ total revenue will increase.