ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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when the demand for the good is perfectly inelastic
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when the demand for the good is infinite
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when the good is an inferior good
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when the good’s price elasticity of demand is positive
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Detailed explanation-1: -Buyers will go on purchasing as long as the satisfaction they derive from consuming is greater than the price they pay (the marginal utility of consumption). If prices rise, additional suppliers will be enticed to enter the market. Supply will increase until a market-clearing price is reached again.
Detailed explanation-2: -Supply of goods and services Price is what the producer receives for selling one unit of a good or service. An increase in price almost always leads to an increase in the quantity supplied of that good or service, while a decrease in price will decrease the quantity supplied.
Detailed explanation-3: -One reason that the quantity demanded of a good increases when its price falls is that the: lower price increases the real incomes of buyers, enabling them to buy more. price decline shifts the supply curve to the left.
Detailed explanation-4: -It’s a fundamental economic principle that when supply exceeds demand for a good or service, prices fall. When demand exceeds supply, prices tend to rise. There is an inverse relationship between the supply and prices of goods and services when demand is unchanged.