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Question
If the percentage increase in the quantity of a commodity is smaller than the percentage fall in its price, the coefficient of price elasticity of demand is ______.
Options
greater than 1
equal to 1
smaller than 1
zero
Solution
If the percentage increase in the quantity of a commodity is smaller than the percentage fall in its price, the coefficient of price elasticity of demand is smaller than 1.
Explanation:
If the percentage increase in the quantity demanded is smaller than the percentage fall in its price, the demand is relatively inelastic. In this case, the coefficient of price elasticity of demand is less than 1.
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