ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an equal proportionate decrease in the amount demanded
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an equal proportionate decrease in expenditure on the product
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an increase in the product’s percentage of total consumer expenditure
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no change in the amount of the product demanded
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Detailed explanation-1: -If the number is equal to 1, elasticity of demand is unitary. In other words, quantity changes at the same rate as price.
Detailed explanation-2: -Less deadweight loss results from the imposition of a tax when demand is inelastic and supply is inelastic. What will happen to the quantity demanded of a unitary elastic product when its price increases by 5%? Quantity demanded will drop to zero.
Detailed explanation-3: -Unitary elastic demand is a type of demand which changes in the same proportion to its price. It means that the percentage change in demand is exactly equal to the percentage change in price. In the unitary demand, the product elasticity is negative as the product price decrease does not help to generate more revenue.
Detailed explanation-4: -Is the elasticity of demand for any product, at any unitary price? Yes, it occurs when prices decrease and increase.