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
Question : Statement 1: The concept of price elasticity of demand measures the responsiveness of quantity demanded to changes in income.
Statement 2: Price elasticity of demand can be calculated by dividing the percentage change in quantity demanded by the percentage change in price.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statement 1 and statement 2 are true.
Option 4: Both statement 1 and statement 2 are false.
Question : Statement 1: Price elasticity of demand is not applicable to perfectly elastic demand.
Statement 2: Perfectly elastic demand implies that any change in price leads to an infinitely large change in quantity demanded.
Question : Statement 1: When the price of a product increases by 10%, and its quantity demanded decreases by 5%, the price elasticity of demand is - 0.5.
Statement 2: The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.
Question : Statement 1: If the price elasticity of demand for a product is -1.5, a 10% increase in price will result in a 15% decrease in quantity demanded.
Statement 2: The absolute value of the price elasticity of demand represents the percentage change in quantity demanded for a 1% change in price.
Question : Statement 1: The midpoint formula is used to calculate price elasticity of demand when price changes between two points on the demand curve.
Statement 2: The midpoint formula divides the percentage change in quantity demanded by the average percentage change in price.
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile