Question

In 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

In 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:

Demand exhibits inelasticity when the percentage change in the quantity demanded of a commodity is less than the percentage change in its price. This is indicated by a price elasticity of demand coefficient ED < 1.