ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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decrease the quantity purchased.
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have no effect on consumer surplus.
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increase total expenditure on the commodity.
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leave the quantity purchased unchanged.
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Detailed explanation-1: -An inelastic demand or supply curve is one where a given percentage change in price will cause a smaller percentage change in quantity demanded or supplied. Unitary elasticity means that a given percentage change in price leads to an equal percentage change in quantity demanded or supplied.
Detailed explanation-2: -When the elasticity of demand is unity, the Marginal revenue is zero. Thus because of marginal revenue which is zero, the elasticity of demand is one, this means the proportionate change in quantity demand is equal to the proportionate change in price. Was this answer helpful?
Detailed explanation-3: -If the price elasticity of demand for a product is unity, a decrease in price will: increase the quantity demanded but decrease total revenue.
Detailed explanation-4: -A product with high price elasticity of demand will see demand fall sharply when prices rise. For the product with high elasticity of demand, the downward-sloping demand curve appears flatter, and for every change in price, there is a large change to the quantity demanded.
Detailed explanation-5: -If price elasticity is exactly 1 (price change leads to an equal percentage change in demand), it is known as unitary elasticity.