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12 November, 00:58

If the percentage change in the quantity demanded of a good is greater than the percentage change in the price of the good, then how is the demand for the good characterized?

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Answers (2)
  1. 12 November, 03:19
    0
    Price Elastic

    Explanation:

    We know that

    The formula to compute the price elasticity of demand is shown below:

    = (Percentage change in quantity demanded) : (percentage change in price)

    The classification as follows

    1. Perfectly inelastic = If zero

    2. Inelastic = When elasticity is below than one

    3. Unitary elastic = When elasticity is equal to one

    4. Elastic = When elasticity is exceeded than one

    5. Perfectly elastic = When elasticity is in infinity

    Since the percentage change in the quantity demanded of a good is greater than the percentage change in the price of the good which reflects that the elasticity is more than one
  2. 12 November, 04:33
    0
    The demand is price elastic in nature because it is greater than 1.

    Explanation:

    Price Elasticity of demand refers to the response of quantity demanded of a good to the change in price. Of course, when the price decreases, quantity demanded of a good increases and vice-versa but to how much degree is determined by the Price Elasticity of demand.

    Mathematically, Price Elasticity of Demand is the ratio of % change in quantity demanded of a good and % change in the price of a good i. e.

    Price Elasticity of Demand = % change in quantity demanded of a good / % change in the price of a good

    In the problem, since the percentage change in the quantity demanded of a good is greater than the percentage change in the price of the good, the above ratio will be greater than 1. Hence, the demand of the good is price elastic.
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