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Question
Define price elasticity of demand.
Solution
It is the measure of the degree of responsiveness of the demand for a good to the changes in its price. It is defined as the percentage change in the demand for a good divided by the percentage change in its price.
`"ed" = "Percentage change in demand for good"/"Percentage change in price of that good"`
`"ed" = (Δ"Q")/(Δ"P") xx "P"/"Q"`
Where ΔQ = Q2 − Q1, change in demand
ΔP = P2 − P1, change in price
P1 = Initial price
Q1 = Initial quantity
RELATED QUESTIONS
As we move along a downward sloping straight line demand curve from left to right, price
an elasticity of demand : (choose the correct alternative)
(a) remains unchanged
(b) goes on falling
(c) goes on rising
(d) falls initially then rises
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Concept of elasticity of demand is useful for finance minister.
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Fill in the blank with appropriate alternatives given below:
The slope of demand curve is _______________ in case of inelastic demand.
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Concept of Elasticity of Demand is useful for finance minister.
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Elasticity resulting from infinite change in quantity demanded.
The concept of elasticity of demand was introduced by
What are the methods of measuring Elasticity of demand?
Identify the correct pair of items from the following Columns I and II:
| Columns I | Columns II |
| (1) Perfectly elastic supply | (a) Es > 1 |
| (2) Perfectly inelastic supply | (b) Es < 1 |
| (3) Unitary elastic supply | (c) Es = 1 |
| (4) Relatively elastic supply | (d) Es = 0 |
Elasticity of the demand is available when:
Identify the correctly matched pair from the items in Column A by matching them to the items in Column B:
| Column A | Column B | ||
| 1 | Relatively Inelastic Demand | (a) | ed > 1 |
| 2 | Relatively Elastic Demand | (b) | ed < 1 |
| 3 | Perfectly Inelastic Demand | (c) | ed = 0 |
| 4 | Perfectly Elastic Demand | (d) | ed = 1 |
State with reasons whether you agree or disagree with the following statement:
The elasticity of demand gets influenced by the nature of the commodity.
mention any two examples of composite demand.
When change in price is greater than the change in quantity demand it is a case of elastic demand.
