ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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decrease by 30%
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decrease by 40%.
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increase by 30%.
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increase by 40%.
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Detailed explanation-1: -What Does a Price Elasticity of 1.5 Mean? If the price elasticity is equal to 1.5, it means that the quantity of a product’s demand has increased 15% in response to a 10% reduction in price (15% / 10% = 1.5).
Detailed explanation-2: -Answer and Explanation: If the price elasticity of supply is 1.5, and a price increase led to a 1.8% increase in quantity supplied, the the price increase is 0.83%. .
Detailed explanation-3: -Price elasticity of supply measures the responsiveness to the supply of a good or service after a change in its market price. According to basic economic theory, the supply of a good will increase when its price rises. Conversely, the supply of a good will decrease when its price decreases.
Detailed explanation-4: -An inelastic demand or inelastic supply is one in which elasticity is less than one, indicating low responsiveness to price changes. Unitary elasticities indicate proportional responsiveness of either demand or supply.