ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Answer and Explanation: The less sensitive demand is to changes in price, the less elastic a good is. This means that if the demand for a product is not affected by an increase in price is call a low elasticity of demand. Having a low elasticity of demand is known as inelastic demand.

Detailed explanation-2: -Inelastic demand is when a buyer’s demand for a product does not change as much as its change in price. When price increases by 20% and demand decreases by only 1%, demand is said to be inelastic. This situation typically occurs with everyday household products and services.

Detailed explanation-3: -At an elasticity of 0 consumption would not change at all, in spite of any price increases. Revenue is maximised when price is set so that the elasticity is exactly one.

Detailed explanation-4: -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-5: -On the other hand, if the price for an inelastic good is increased and the demand does not change, the total revenue increases due to the higher price and static quantity demanded. However, price increases typically do lead to a small decrease in quantity demanded.