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Question
As a result of 5% fall in the price of a good, its demand rises by 12%, the demand for the good will said be ______.
Options
relatively less elastic demand
relatively more elastic demand
Perfectly inelastic demand
Perfectly elastic demand
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Solution
As a result of 5% fall in the price of a good, its demand rises by 12%, the demand for the good will said be relatively more elastic demand.
Explanation:
Since the demand increases by a larger percentage (12%) in response to a smaller percentage decrease in price (5%), the demand is considered relatively more elastic. This indicates that consumers are highly responsive to price changes for this good.
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Identify the correctly matched pair from the items in Column A by matching them to the items in Column B:
| Column A | Column B | ||
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| 2 | Relatively Elastic Demand | (b) | ed < 1 |
| 3 | Perfectly Inelastic Demand | (c) | ed = 0 |
| 4 | Perfectly Elastic Demand | (d) | ed = 1 |
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