John consumes 5 units of bottled water per week. When the unit price of bottled water increases from $100 to $200, the quantity demanded remains at 5 units per week. Johns price elasticity of demand for bottled water is

ELASTICITY OF DEMAND

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

John consumes 5 units of bottled water per week. When the unit price of bottled water increases from $100 to $200, the quantity demanded remains at 5 units per week. John’s price elasticity of demand for bottled water is

A	equal to 0.
B	between 0 and 1.
C	equal to 1.
D	larger than 1.

Explanation:

Detailed explanation-1: -When the price elasticity of demand for a good is perfectly inelastic, changes in the price do not affect the quantity demanded the good; raising prices will always cause total revenue to increase.

Detailed explanation-2: -The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price.

Detailed explanation-3: -The elasticity of bottled water is about-0.498.

Detailed explanation-4: -Answer and Explanation: Bottled water will have a relatively inelastic demand. Unlike water which is a necessity and has a perfectly inelastic demand, bottled water is not a necessity and there are alternatives if the price goes up too much. As people will switch if prices go up, the demand is not perfectly inelastic.

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ECONOMICS (CBSE/UGC NET)

ECONOMICS

ELASTICITY OF DEMAND