ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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rise by more than 10%
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rise by less than 10%
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fall by more than 10%
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fall by less than 10%
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Detailed explanation-1: -Answer and Explanation: The percentage decrease in quantity is 5% (=0.5*10). Let the initial price and quantity be 10 and 100, respectively. The total revenue earned initially is 1000 (=10*100).
Detailed explanation-2: -If the elasticity of supply is 0.5, then a 10% decrease in price will result in a 5% increase in quantity supplied.
Detailed explanation-3: -Demand for a good is said to be elastic when the elasticity is greater than one. A good with an elasticity of −2 has elastic demand because quantity falls twice as much as the price increase; an elasticity of −0.5 has inelastic demand because the quantity response is half the price increase.
Detailed explanation-4: -A score between 0 and 1 is considered inelastic, since variation in price has only a small impact on demand. A product with an elasticity of 0 would be considered perfectly inelastic, because price changes have no impact on demand.
Detailed explanation-5: -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.