GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Unit elastic
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Highly elastic
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Perfectly elastic
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Perfectly inelastic
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Detailed explanation-1: -If the price of any commodity decreases by 20% and the demand for that commodity increases by 40% then the elasticity of demand would be highly elastic as the proportionate change of quantity demand is greater than the proportionate change of price.
Detailed explanation-2: -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-3: -Quantity demanded and price are inversely related this means that as the price of the goods increase the demand of that commodity decreases and vice versa. This is because of the law of diminishing marginal utility.