ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If price elasticity is greater than 1, the good is elastic; if less than 1, it is inelastic. If a good’s price elasticity is 0 (no amount of price change produces a change in demand), it is perfectly inelastic.

Detailed explanation-2: -When demand is inelastic, a fall in the price of a commodity leads to fall in total expenditure on it. On the other hand, when price increases, total expenditure also increases. It means, in case of less elastic demand, price and total expenditure move in the same direction.

Detailed explanation-3: -Elastic goods include luxury items and certain food and beverages as changes in their prices affect demand. Inelastic goods may include items such as tobacco and prescription drugs as demand often remains constant despite price changes.

Detailed explanation-4: -You can calculate elasticity by dividing the percentage change in demand by the percentage change in the determinant, such as price. If the ratio of percentage change in demand to the percentage change in the determinant results in an elasticity quotient greater than one, the demand is considered elastic.