ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The demand of a product or service
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The relationship between the change in quantity demanded and the change in price
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The relationship between change in quantity demanded and change in cost
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The relationship between inventory and price
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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 arc price elasticity of demand measures the responsiveness of quantity demanded to a price. It takes the elasticity of demand at a particular point on the demand curve, or between two points on the curve. on a graph. outcome whether price falls or rises.
Detailed explanation-3: -The measure of responsiveness of the demand for a good towards the change in the price of a related good (substitutes and complements) is called cross price elasticity of demand.
Detailed explanation-4: -The elasticity of demand tells suppliers how their total revenue will change if their price changes. Total revenue equals total quantity sold multiplied by price of good. With elastic demand – a rise in price lowers total revenue TR increases as price falls.
Detailed explanation-5: -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%).