Question

True or False with Reason:

Price Elasticity of Demand is zero if with 20% increase in price, expenditure on the commodity also rises by 20%.

Answer 1

This statement is true.

Explanation:

• Total expenditure = price × quantity.
• If price rises by 20% and total expenditure also rises by 20%, quantity demanded must remain unchanged.
• Since quantity demanded does not change, price elasticity of demand is zero.