ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Quantity demanded doesn’t change
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Quantity demanded decreases by 50%
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Quantity demanded increases by 50%
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Quantity demanded increases by 25%
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Quantity demanded decreases by 25%
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Detailed explanation-1: -Answer and Explanation: If demand is unit elastic, a 25 percent increase in price will result in 25 percent decrease in quantity demanded.
Detailed explanation-2: -If the elasticity is equal to one, it means that the change in the quantity demanded is exactly equal to the change in price, so the demand response is exactly proportional to the change in price. We call this unitary elasticity, because unitary means one.
Detailed explanation-3: -When percentage change in quantity demanded is equal to the percentage change in price, the elasticity of demand is unitary elastic.
Detailed explanation-4: -We say that demand is elastic when quantity demanded changes a lot when the price changes; more precisely, the percentage change in quantity demanded is greater than the percentage change in price. In this case, quantity demanded is very responsive to changes in price.
Detailed explanation-5: -Elastic demand or supply curves indicate that the quantity demanded or supplied responds to price changes in a greater than proportional manner. 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.