ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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0.286
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0.162
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0.324
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0.367
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Detailed explanation-1: -If a 2% price rise results in a 4% decrease in quantity demanded, then (c) demand is elastic, and its total revenue decreases. When a product experiences a drastic change in the demand with a minimal price change, the demand for the product is said to be elastic.
Detailed explanation-2: -Percentage change in Qd = (Q1-Q2) / [1/2 (Q1+Q2)] where Q1 = initial Qd, and Q2 = new Qd. Percentage change in P = (P1-P2) / [1/2 (P1 + P2)] where P1 = initial Price, and P2 = New Price. Characteristics: Ed approaches infinity, demand is perfectly elastic.
Detailed explanation-3: -Use the demand function for quantity You use the demand formula, Qd = x + yP, to find the demand line algebraically or on a graph. In this equation, Qd represents the number of demanded hats, x represents the quantity and P represents the price of hats in dollars.
Detailed explanation-4: -When a 5% increase in income causes a 3% drop in quantity demanded of a good: a. the income elasticity is 0.6 and the good is an inferior good.