ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -We say that demand is inelastic when quantity demanded changes just a little when the price changes; more precisely, the percentage change in quantity demanded is less than the percentage change in price. In this case, quantity demanded is not very responsive to changes in price.

Detailed explanation-2: -The more broadly a good is defined, the smaller the number of substitutes and hence the less price elastic the demand for the good. Conversely, the more narrowly a good is defined, the larger the number of substitutes and hence the more price elastic the demand for the good.

Detailed explanation-3: -An elastic demand is one in which the change in quantity demanded due to a change in price is large. An inelastic demand is one in which the change in quantity demanded due to a change in price is small. If the formula creates an absolute value greater than 1, the demand is elastic.

Detailed explanation-4: -When demand is price inelastic, a given percentage change in price results in a smaller percentage change in quantity demanded. That implies that total revenue will move in the direction of the price change: a reduction in price will reduce total revenue, and an increase in price will increase it.