ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a decrease in costs
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a decrease in sales
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an increase in revenue
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an increase in profits
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Detailed explanation-1: -Elasticity of Demand by Price If the price elasticity of demand is greater than 1, it is deemed elastic. That is, demand for the product is sensitive to an increase in price.
Detailed explanation-2: -When elasticity of demand is greater than 1, demand is elastic and seller’s revenue changes in the opposite direction.
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: -Luxury goods represent normal goods associated with income elasticities of demand greater than one.