ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a change in its price will not affect its quantity demanded.
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a change in its price will not affect the total revenue.
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a change in the price of its substitute will not affect the demand for the good.
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a change in the income of consumers does not affect their total expenditure.
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Detailed explanation-1: -If a good’s price elasticity is 0 (no amount of price change produces a change in demand), it is perfectly inelastic. If price elasticity is exactly 1 (price change leads to an equal percentage change in demand), it is known as unitary elasticity. The availability of a substitute for a product affects its elasticity.
Detailed explanation-2: -If the number is equal to 1, elasticity of demand is unitary. In other words, quantity changes at the same rate as price.
Detailed explanation-3: -Elastic, Unit Elastic, and Inelastic Demand If the absolute value of the price elasticity of demand is greater than 1, demand is termed price elastic. If it is equal to 1, demand is unit price elastic. And if it is less than 1, demand is price inelastic.
Detailed explanation-4: -An elastic demand is one in which the elasticity is greater than one, indicating a high responsiveness to changes in price. Elasticities that are less than one indicate low responsiveness to price changes and correspond to inelastic demand.
Detailed explanation-5: -Price and total revenue have a negative relationship when demand is elastic (price elasticity > 1), which means that increases in price will lead to decreases in total revenue. Price changes will not affect total revenue when the demand is unit elastic (price elasticity = 1).