ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Answer and Explanation: The quantity demanded of a good will decrease whenever the price increases. A price elasticity of demand of 2 means that for every 1% increase in price, the quantity demanded will fall by 2%. Thus, for a 10% increase in price, we expect the quantity demanded to fall by 20%.

Detailed explanation-2: -Answer and Explanation: 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-3: -If the percent change in a good’s price is offset by an equal percent change in the quantity demanded, economists would label the demand for that good as unit elastic. So if a price of a good increases by 20 percent and the quantity demanded decreases by 20 percent, the demand for that good is considered unit elastic.

Detailed explanation-4: -The correct option is: b. is larger than 10 percent. The demand is said to be elastic when the percentage change in demand is more than the percentage change in the price. Therefore, in the given case the percentage change in demand has to be more than 10%.

Detailed explanation-5: -A) Elastic is the right answer.