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A 5% fall in price of X leads to rise in 10% rose in demand. in case of good Y, a 2% rise in rpice leads to 6% fall in its demand. which is more elastic
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A 5% fall in price of X leads to rise in 10% rose in demand. in case o...
The concept of elasticity of demand measures the responsiveness of the quantity demanded of a good to changes in its price. It helps to understand how sensitive consumers are to price changes and whether the demand for a particular good is elastic or inelastic.
**Elasticity of Demand**
Elasticity of demand is calculated using the formula:
Elasticity = Percentage change in quantity demanded / Percentage change in price
If the elasticity of demand is greater than 1, it is considered elastic, meaning that a small change in price leads to a relatively larger change in quantity demanded. On the other hand, if the elasticity of demand is less than 1, it is considered inelastic, indicating that a change in price has a smaller effect on quantity demanded.
**Price Change in Good X**
According to the information provided, a 5% fall in the price of good X leads to a 10% rise in demand. To determine the elasticity of demand for good X, we can use the formula mentioned earlier.
Percentage change in quantity demanded = 10%
Percentage change in price = -5%
Elasticity = 10% / (-5%) = -2
Since the elasticity of demand for good X is greater than 1 (-2 > 1), it is considered elastic. This means that a 5% decrease in price leads to a relatively larger increase (10%) in the quantity demanded of good X.
**Price Change in Good Y**
For good Y, a 2% rise in price leads to a 6% fall in demand. Using the same formula, we can calculate the elasticity of demand for good Y.
Percentage change in quantity demanded = -6%
Percentage change in price = 2%
Elasticity = -6% / 2% = -3
Again, the elasticity of demand for good Y is greater than 1 (-3 > 1), indicating that it is elastic. This implies that a 2% increase in price results in a relatively larger decrease (6%) in the quantity demanded of good Y.
**Conclusion**
Both good X and good Y have elastic demands since their respective elasticities of demand are greater than 1. However, the demand for good Y is more elastic than the demand for good X. This means that a small change in the price of good Y has a larger effect on the quantity demanded compared to a similar change in the price of good X.
In summary, the elasticity of demand helps to understand the sensitivity of quantity demanded to changes in price. In the case of good X and good Y, both have elastic demands, but the demand for good Y is more elastic than the demand for good X.
**Elasticity of Demand**
Elasticity of demand is calculated using the formula:
Elasticity = Percentage change in quantity demanded / Percentage change in price
If the elasticity of demand is greater than 1, it is considered elastic, meaning that a small change in price leads to a relatively larger change in quantity demanded. On the other hand, if the elasticity of demand is less than 1, it is considered inelastic, indicating that a change in price has a smaller effect on quantity demanded.
**Price Change in Good X**
According to the information provided, a 5% fall in the price of good X leads to a 10% rise in demand. To determine the elasticity of demand for good X, we can use the formula mentioned earlier.
Percentage change in quantity demanded = 10%
Percentage change in price = -5%
Elasticity = 10% / (-5%) = -2
Since the elasticity of demand for good X is greater than 1 (-2 > 1), it is considered elastic. This means that a 5% decrease in price leads to a relatively larger increase (10%) in the quantity demanded of good X.
**Price Change in Good Y**
For good Y, a 2% rise in price leads to a 6% fall in demand. Using the same formula, we can calculate the elasticity of demand for good Y.
Percentage change in quantity demanded = -6%
Percentage change in price = 2%
Elasticity = -6% / 2% = -3
Again, the elasticity of demand for good Y is greater than 1 (-3 > 1), indicating that it is elastic. This implies that a 2% increase in price results in a relatively larger decrease (6%) in the quantity demanded of good Y.
**Conclusion**
Both good X and good Y have elastic demands since their respective elasticities of demand are greater than 1. However, the demand for good Y is more elastic than the demand for good X. This means that a small change in the price of good Y has a larger effect on the quantity demanded compared to a similar change in the price of good X.
In summary, the elasticity of demand helps to understand the sensitivity of quantity demanded to changes in price. In the case of good X and good Y, both have elastic demands, but the demand for good Y is more elastic than the demand for good X.
Community Answer
A 5% fall in price of X leads to rise in 10% rose in demand. in case o...
Good Y, Ed= 3 is More elastic
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