ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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0.2
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0.4
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1.5
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2.5
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Detailed explanation-1: -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.
Detailed explanation-2: -The average values for quantity and price are used so that the elasticity will be the same whether calculated going from lower price to higher price or from higher price to lower price. For example, going from $8 to $10 is a 25% increase in price, but going from $10 to $8 is only a 20% decrease in price.
Detailed explanation-3: -Can you explain this answer?, a detailed solution for What is the price elasticity of demand when, price changes from Rs. 10 to Rs. 12 and correspondingly demand changes from 6 units to 4 units? a)0.833b)1.6c)2.2d)1.833Correct answer is option ‘C’.
Detailed explanation-4: -The revenue would increase by $8. The value of elasticity of demand is. which is greater than 1. Hence the demand is elastic.