ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Elastic
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Inelastic
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Unit elastic
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None of the above
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Detailed explanation-1: -Basic necessities are generally said to be price inelastic in comparison with luxury goods. In particular, fluid milk has long been regarded as one of the most price inelastic commodities in many countries.
Detailed explanation-2: -The value of 1.6 tells us that this particular product’s price is elastic.
Detailed explanation-3: -Besides, if they reduce their production cost, they can enjoy more profit. So the price elasticity of demand for milk for producers is inelastic demand. So, here, we can see that the elasticity of demand is less than 1 which means it is inelastic demand.
Detailed explanation-4: -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.