Question

True or False with Reason:

If the proportionate change in the price of a commodity is more than the proportionate change in its quantity demand per unit of time, its price elasticity of demand is greater than unity.

Answer 1

This statement is false.

Explanation:

• Price elasticity of demand = proportionate change in quantity demanded ÷ proportionate change in price.
• If proportionate change in price is more than proportionate change in quantity demanded, then elasticity is less than one.
• Hence, the price elasticity of demand is less than unity, not greater than unity.