Advertisements
Advertisements
Question
The government wants to reduce the consumption of good by 10%. The price elasticity of demand for elasticity is -0.4. The government should raise the price of elasticity by ______.
Options
2%
25%
0.4%
4%
Advertisements
Solution
The government wants to reduce the consumption of good by 10%. The price elasticity of demand for elasticity is -0.4. The government should raise the price of elasticity by 25%.
Explanation:
Percentage Change in Quantity Demanded = Price Elasticity of Demand × Percentage Change in Price
−10% = −0.4 × Percentage Change in Price
Percentage Change in Price = `(-10%)/-0.4`
= 25%
APPEARS IN
RELATED QUESTIONS
A 5 percent fall in the price of a good raises its demand from 300 units to 318 units. Calculate its price elasticity of demand.
Define or explain the following concepts (Any THREE):
Stock
Choose the correct answer :
Demand of labour is _______
Elasticity of demand for two goods A and B is -2 and -3 respectively. Then good A has higher elasticity.
Which of the following is the most likely reason for the relatively high elasticity of bottled water?
Assertion (A): The demand for soap, salt, matches etc. is highly elastic.
Reason (R): The demand for soap, salt, matches etc. is highly inelastic because the consumer spends a very small amount of expenditure in relation to his/her income.
Explain briefly the factors on which elasticity of demand depends.
When will the demand curve be parallel to x-axis?
Comment upon the shape of the demand curve, if Ed = 0.
How does the time period affect the elasticity of demand?
