ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Expert Answer 18) ep =-0.6 Ep = %change in Quantity demanded /%change in Price-0.6 = %change in QTY demanded/10% % change in QTY demanded =-0.6*10% =-6% Thus QTY falls (because of the negative sign) by 6% Thus correct option is (c).

Detailed explanation-2: -If income elasticity of demand is 0.6, then it means that for every 1% increase in income, the quantity demanded will increase by 0.6%. While own-price elasticity is usually negative, income elasticity of demand can be positive, negative, or zero.

Detailed explanation-3: -Thus, a product’s price elasticity of demand equal to 0.6 means that the demand is inelastic (since the elasticity is less than 1). An increase in the price by 1% would reduce the quantity demanded by 0.6%.

Detailed explanation-4: -If the elasticity of supply is 0.5, then a 10% decrease in price will result in a 5% increase in quantity supplied.