Question

A 5% fall in the price of Good X leads to a 10% rise in its demand. In case of Good Y, a 2% rise in price leads to a 6% fall in its demand. In the given case, ______ is more elastic.

Options

• X

• Y

• Both X and Y are equally elastic

• Both X and Y are inelastic

Answer 1

A 5% fall in the price of Good X leads to a 10% rise in its demand. In case of Good Y, a 2% rise in price leads to a 6% fall in its demand. In the given case, Y is more elastic.

Explanation:

Good X has elasticity magnitude (10%/5%=2). Good Y has elasticity magnitude (6%/2%=3), so Y is more elastic.