ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increases
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decreases
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remains constant
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becomes perfectly inelastic
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Detailed explanation-1: -In the long-run consumers have more time find substitute goods which means they will be more sensitive to changes in price and thus the price elasticity of demand will increase.
Detailed explanation-2: -Normal goods have a positive income elasticity of demand; as incomes rise, more goods are demanded at each price level.
Detailed explanation-3: -Elasticities are often lower in the short run than in the long run. On the demand side of the market, it can sometimes be difficult to change Qd in the short run, but easier in the long run.
Detailed explanation-4: -Increase in demand increases the quantity. Decrease in supply decreases the quantity. Figure 4.14(b) shows the effects of a decrease in demand and an increase in supply. A decrease in demand shifts the demand curve leftward, and an increase in supply shifts the supply curve rightward.