ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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0.07%.
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0.60%
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6%
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15%
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Detailed explanation-1: -The most common elasticity is Price Elasticity of Demand. This measures how responsive demand is to a change in price. If price of tomatoes increase 20%, and quantity falls by 4%, then the PED =-0.2.
Detailed explanation-2: -If a 2% price rise results in a 4% decrease in quantity demanded, then (c) demand is elastic, and its total revenue decreases. When a product experiences a drastic change in the demand with a minimal price change, the demand for the product is said to be elastic.
Detailed explanation-3: -If a 10 percent increase in price results in a 20 percent drop in demand, then the elasticity coefficient will be 20/10 = 2.0. Or if a 15 percent increase in price results in a 10 percent decline in quantity demanded, then the elasticity coefficient will be 15/10 = 0.67.