Question

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

Statement 1: Higher numerical value of elasticity means that change in price has larger effect on the quantity demanded. 

Statement 2: The coefficient of price elasticity of demand is always a negative number.

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

Both the Statements are true.

Explanation:

A higher numerical value of elasticity indicates a larger quantity response to a price change. Price elasticity is generally negative because price and quantity demanded move in opposite directions; the negative sign is often ignored when comparing elasticity.