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Question
In 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
In 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:
Demand exhibits inelasticity when the percentage change in the quantity demanded of a commodity is less than the percentage change in its price. This is indicated by a price elasticity of demand coefficient ED < 1.
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