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Question
Define elasticity of demand.
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Solution
Price elasticity of demand tells us the amount of the change in the quantity demanded of a commodity in response to change in its price. In other words, it measures the degree of change of demand in response to changes in price.
RELATED QUESTIONS
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 buys 30 units of a good at a price of the Rs10per unit. The price elasticity of demand for the good is (-) 1. How many units will the consumer buy at a price of Rs 9 per unit? Calculate.
When the price of a good falls from Rs 10 to Rs 8 per unit, its demand rises from 20 units to 24 units. What can you say about price elasticity of demand of the good through the expenditure approach?
Write short notes on the Proportional method of measuring the elasticity of demand.
State whether the following statement is TRUE and FALSE.
Perfectly inelastic demand curve is parallel to the X axis.
State whether the following statement is true or false. Give valid reasons in support of your answer.
Luxury goods often have lower price elasticity of demand.
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 methods of measuring Elasticity of demand?
Explain the concept of price elasticity of demand.
- Luxuries goods have generally elastic demand.
- Goods whose close substitutes are available have inelastic demand.
