ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Fall by 12%
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Fall by 5%
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Fall by 10%
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Fall by 20%
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Detailed explanation-1: -Elastic Demand Note that a change in price results in a large change in quantity demanded. An example of products with an elastic demand is consumer durables.
Detailed explanation-2: -So, if the price of a good increases by 10 percent and the quantity demanded decreases by only 5 percent, that good is said to have inelastic demand.
Detailed explanation-3: -A change in the price will result in a smaller percentage change in the quantity demanded. For example, a 10% increase in the price will result in only a 4.5% decrease in quantity demanded.
Detailed explanation-4: -Answer and Explanation: The correct answer choice is B. Demand is said to be price elastic when the value of price elasticity is greater than one. Here, the given percentage change in quantity demanded is 15, while the given percentage change in price is 10 implying that the price elasticity of demand is 1.5.