ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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.5 inelastic
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.5 elastic
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2 inelastic
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2 elastic
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Detailed explanation-1: -Price Elasticity of Demand = Percentage change in quantity / Percentage change in price. Price Elasticity of Demand =-15% รท 60% Price Elasticity of Demand =-1/4 or-0.25.
Detailed explanation-2: -If demand is elastic, then a price increase reduces the total revenue. When the price increases, then the demand falls by a considerable percentage. Then, total revenue starts moving in contradictory directions. Therefore, total income declines when the price of any commodity rises.
Detailed explanation-3: -When demand is elastic, an increase in price will cause B. a decrease in total revenue. The total revenue method of determining elasticity states that demand is elastic when price and total revenue move in opposite directions. If price and total revenue move in the same direction, then demand is inelastic.
Detailed explanation-4: -How to Calculate Price Elasticity. To calculate price elasticity, divide the change in demand (or supply) for a product, service, resource, or commodity by its change in price. That figure will tell you which bucket your product falls into.