Q6 of 50 Page 1

What will be the effect of a 10 per cent rise in the price of a good on its demand if the price elasticity of demand is (a) Zero, (b) -1, (c) -2?

a)Zero :


The elasticity of demand = Percentage change in quantity demand/Percentage change in price


0 = Percentage change in quantity demand/10


Percentage change in quantity demand = 0


B) -1


Elasticity of demand = Percentage change in quantity demand/Percentage change in price


-1 = Percentage change in quantity demand/10


Percentage change in quantity demand = 210


10 percent.


c) -2


Elasticity of demand = Percentage change in quantity demand/Percentage change in price


-2 = Percentage change in quantity demand/10


Percentage change in quantity demand = 20%


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