Question

In the following Question, read the following statement and choose the correct alternative among those given:

Statement 1: Elasticity is always measured and compared in absolute terms and not in algebraic terms. 

Statement 2: Price elasticity of demand is affected by absolute change and not by percentage change in price or demand.

Options

• Both the Statements are true.

• Both the Statements are false.

• Statement 1 is true and Statement 2 is false.

• Statement 2 is true and Statement 1 is false.

Answer 1

Statement 1 is true and Statement 2 is false.

Explanation:

Elasticity is measured and compared in absolute terms, ignoring the negative sign. It depends on percentage changes in price and quantity demanded, not on their absolute changes.