Question : Statement 1: Elasticity of demand measures the sensitivity of quantity demanded to changes in price.
Statement 2: If the percentage change in price is greater than the percentage change in quantity demanded, demand is considered elastic.
Option 1: Both statements are true.
Option 2: Both statements are false.
Option 3: Statement 1 is true, and statement 2 is false.
Option 4: Statement 1 is false, and statement 2 is true.
Correct Answer: Both statements are true.
Solution : The correct answer is (A) Both statements are true.
Statement 1: Elasticity of demand measures the sensitivity of quantity demanded to changes in price. This statement is true. Elasticity of demand is a measure of how responsive the quantity demanded of a good is to changes in its price. It quantifies the percentage change in quantity demanded relative to the percentage change in price.
Statement 2: If the percentage change in price is greater than the percentage change in quantity demanded, demand is considered elastic. This statement is also true. Demand is considered elastic when the percentage change in quantity demanded is greater than the percentage change in price. In other words, a small change in price leads to a proportionally larger change in quantity demanded.
Both statements accurately describe the concept of elasticity of demand
