ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -If the elasticity coefficient is equal to one, demand is unitarily elastic as shown in Figure 3. For example, a 10% quantity change divided by a 10% price change is one. This means that a 1% change in quantity occurs for every 1% change in price.

Detailed explanation-2: -Demand or supply for which the elasticity coefficient is equal to 1; Means the percentage change in the quantity demanded or supplied is equal to the percentage change in price.

Detailed explanation-3: -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-4: -Elasticity values are as follows: Absolute value of coefficient = 0: perfectly inelastic. Absolute value of coefficient <1 (but not zero): relatively inelastic.

Detailed explanation-5: -Inelastic demand: A coefficient answer less than 1 means the product has inelastic demand. Inelastic demand indicates that the product’s demand changes less than the price changes.