ECONOMICS (CBSE/UGC NET)

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ECONOMICS

ELASTICITY OF DEMAND

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
The Larvine family was on a tight budget, but they loved Japanese food. Every Friday, the family of five ate dinner at the only Japanese restaurant in town. A month ago, however, a new owner raised the prices of the family’s favorite dishes by 10 percent. The extra cost forced the Larvines to limit their restaurant dinners to once a month.What can you say about the Larvines’ demand for meals at the Japanese restaurant?
A
It is elastic; a small increase in price resulted in a large decrease in consumption.
B
It is unitary elastic; a small increase in price resulted in a small increase in consumption.
C
It is unitary elastic; a small increase in price resulted in a small decrease in consumption.
D
It is inelastic; a small increase in price resulted in a small decrease in consumption.
Explanation: 

Detailed explanation-1: -What can you say about the Larvines’ demand for meals at the Japanese restaurant? It is elastic; a small increase in price resulted in a large decrease in consumption.

Detailed explanation-2: -Which of the following describes the relative elasticity in demand for the product shown in a period of economic change? Demand is inelastic because it is a low-cost necessity. Which of the following is generally true after a shift in supply or demand? Equilibrium is gradually restored.

Detailed explanation-3: -According to the NBER study, what will happen if a major supplier of oil cuts production, causing the price of gasoline to increase greatly? Gasoline consumption will decrease by a small amount.

Detailed explanation-4: -Factors that can shift the demand curve for goods and services, causing a different quantity to be demanded at any given price, include changes in tastes, population, income, prices of substitute or complement goods, and expectations about future conditions and prices.

There is 1 question to complete.
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