Question

If the percentage increase in the quantity of a commodity is smaller than the percentage fall in its price, the coefficient of price elasticity of demand is ______.

Options

• greater than 1

• equal to 1

• smaller than 1

• zero

Answer 1

If the percentage increase in the quantity of a commodity is smaller than the percentage fall in its price, the coefficient of price elasticity of demand is smaller than 1.

Explanation:

If the percentage increase in the quantity demanded is smaller than the percentage fall in its price, the demand is relatively inelastic. In this case, the coefficient of price elasticity of demand is less than 1.