Advertisements
Advertisements
प्रश्न
Explain price elasticity of demand.
Explain Price Elasticity of Demand. Draw the various degrees of it with diagrams.
Advertisements
उत्तर
Price Elasticity of Demand (PED) examines how sensitive the quantity looked for of a commodity is to a change in its price while maintaining all other factors constant.
`E_p = ("% Change in Quantity Demanded")/("% Change in Price")`
`E_p = (DeltaQ"/"Q)/(DeltaP"/"P)`
where:
- Ep = Price Elasticity of Demand
- ΔQ = Change in Quantity Demanded
- ΔP = Change in Price
- Q = Initial Quantity Demanded
- P = Initial Price
Degrees of Price Elasticity of Demand:
- Perfectly Elastic Demand: The quantity demanded changes infinitely in response to a very slight change in price. For example, Highly competitive markets for identical products.
- Horizontal demand curve.
- Infinite responsiveness to price changes.
- Perfectly inelastic Demand: The quantity demanded remains constant, regardless of changes in prices. For example, life-saving drugs and essential goods such as salt.
- Vertical demand curve.
- Zero responsiveness to price changes.
- Unitary Elastic Demand: Percentage change in quantity demanded is exactly equal to the percentage change in price. For example, certain everyday goods.
-
Demand changes exactly in proportion to price changes.
-
- Relatively Elastic Demand: Percentage change in quantity demanded is greater than the percentage change in price. For example, luxury goods, electronics.
- High responsiveness to price changes.
- Relatively Inelastic Demand: Percentage change in quantity demanded is less than the percentage change in price. For example, necessities like milk and water.
- Low responsiveness to price changes.
Notes
Students should refer to the answer according to the question.
APPEARS IN
संबंधित प्रश्न
Income elasticity of demand for inferior goods is negative.
A consumer buys 18 units of a good at a price of Rs 9 per unit. The price elasticity of demand for the good is (–) 1. How many units the consumer will buy at a price of Rs 10 per unit? Calculate.
The price elasticity of demand for a good is - 0.4. If its price increases by 5 percent, by what percentage will its demand fall? Calculate.
When the price of good rise from Rs 10 per unit to Rs 12 per unit, its quantity demanded falls by 20 percent. Calculate its price elasticity of demand. How much would be the percentage change in its quantity demanded, if the price rises from Rs 10 per unit to Rs 13 per unit?
A consumer spends Rs 100 on a good priced at Rs 4 per unit. When its price falls by 25 percent, the consumer spends Rs 75 on the good. Calculate the price elasticity of demand by the Percentage method.
A consumer spends Rs 400 on a good priced at Rs 8 per unit. When its price rises by 25 percent, the consumer spends Rs 500 on the good. Calculate the price elasticity of demand by the Percentage method.
When the price of good rises from Rs10 to Rs12 per unit, its demand falls from 25 units to 20 units. What can you say about price elasticity of demand of the good through the 'expenditure approach'?
A consumer buys 27 units of a good at a price of Rs 10 per unit. When the price falls to Rs 9 per unit, the demand rises to 30 units. What can you say about price elasticity of demand of the good through the 'expenditure approach'?
8 units of a good are demanded at a price of Rs 7 per unit. Price elasticity of demand is (−) 1. How many units will be demanded if the price rises to Rs 8 per unit? Use expenditure approach of price elasticity of demand to answer this question.
Define or explain the following concept.
Unitary elastic demand.
State whether the following statement isTrue or False with reason:
The concept of elasticity of demand is useful in economic theory.
Give reasons or explain the following statements
Demand for basic necessities is inelastic.
State whether the following statements are TRUE or FALSE :
The demand of foodgrains is inelastic.
Fill in the blanks with appropriate alternatives given in the bracket.
Demand elasticity can be measured from demand curve by ___________ method.
What do you mean by a normal good?
What do you mean by an ‘inferior good’? Give some examples.
Consider the demand for a good. At price Rs 4, the demand for the good is 25 units. Suppose the price of the good increases to Rs 5, and as a result, the demand for the good falls to 20 units. Calculate the price elasticity.
Fill in the blank with appropriate alternatives given below:
The slope of demand curve is _______________ in case of inelastic demand.
State whether the following statement is TRUE and FALSE.
Concept of Elasticity of Demand is useful for finance minister.
Give reason or explain the following statement:
Demand for commodity having multiple uses has elastic demand.
Define price elasticity of demand.
State whether the following statement is true or false. Give valid reasons in support of your answer.
The coefficient of price elasticity of demand for the commodity is inversely related to the number of alternative uses of the commodity.
- Assertion (A): Elasticity of demand explains that one variable is influenced by another variable.
- Reasoning (R): The concept of elasticity of demand indicates the effect of price and changes in other factors on demand.
What are the degrees of price elasticity of Demand?
Identify the correct pair of items from the following Columns I and II:
| Columns I | Columns II |
| (1) Perfectly elastic supply | (a) Es > 1 |
| (2) Perfectly inelastic supply | (b) Es < 1 |
| (3) Unitary elastic supply | (c) Es = 1 |
| (4) Relatively elastic supply | (d) Es = 0 |
Elasticity of the demand is available when:
Assertion (A): Elasticity of demand explains that one variable is influenced by another variable.
Reasoning (R): The concept of elasticity of demand indicates the effect of price and changes in other factors on demand.
State with reasons whether you agree or disagree with the following statement:
The elasticity of demand gets influenced by the nature of the commodity.
Study the following table and answer the questions:
| Price of Pen (₹) | Demand for Pen |
| 10 | 500 |
| `square` | 400 |
| 30 | `square` |
| `square` | 200 |
| 50 | `square` |
Questions:
- Complete the above table.
- Which type of relationship is found between the price of a pen and demand for the pen?
Assertion (A) : A change in quantity demanded of one commodity due to a change in the price of other commodity is cross elasticity.
Reasoning (R) : Changes in consumers income leads to a change in the quantity demanded.
mention any two examples of composite demand.
When change in price is greater than the change in quantity demand it is a case of elastic demand.
Define elasticity of demand.
Which type of good typically has inelastic demand?
