ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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TRUE
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FALSE
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Either A or B
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None of the above
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Detailed explanation-1: -Price elasticity measures the responsiveness of the quantity demanded or supplied of a good to a change in its price. It is computed as the percentage change in quantity demanded-or supplied-divided by the percentage change in price.
Detailed explanation-2: -The price elasticity of demand measures the sensitivity of the quantity demanded to changes in the price. Demand is inelastic if it does not respond much to price changes, and elastic if demand changes a lot when the price changes.
Detailed explanation-3: -The cross elasticity of demand is an economic concept that measures the responsiveness in the quantity demanded of one good when the price for another good changes.
Detailed explanation-4: -As a rule of thumb, if the quantity of a product demanded or purchased changes more than the price changes, then the product is considered to be elastic (for example, the price goes up by 5%, but the demand falls by 10%).
Detailed explanation-5: -Answer and Explanation: The correct option is d. The greater the price elasticity of demand, the greater the responsiveness of quantity demanded to price. The greater the price elasticity of demand, the greater is the ratio of the percentage change in the quantity demanded by the percentage change in the price.