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When the demand for a commodity is said to be inelastic ? As a result of a 20 percent fall in the price of a commodity it's demand rises by 25 per cent calculate the price elasticity of demand?
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When the demand for a commodity is said to be inelastic ? As a result ...
What is Inelastic Demand?
When the demand for a commodity is said to be inelastic, it means that a change in the price of the commodity has little or no effect on the quantity demanded. In other words, the demand is relatively insensitive to price changes.
Calculation of Price Elasticity of Demand
Given that the demand for a commodity rises by 25% due to a 20% fall in its price, we can calculate the price elasticity of demand using the following formula:
Price Elasticity of Demand = Percentage Change in Quantity Demanded / Percentage Change in Price
Using the values given in the question, we get:
Price Elasticity of Demand = 25% / -20% = -1.25
Interpretation of Price Elasticity of Demand
Since the value of price elasticity of demand is negative, we know that the commodity has an elastic demand. This means that a small change in price leads to a relatively larger change in the quantity demanded.
In this case, the price elasticity of demand is -1.25. This means that a 1% change in the price of the commodity results in a 1.25% change in the quantity demanded.
Conclusion
In conclusion, when the demand for a commodity is said to be inelastic, a change in price has little or no effect on the quantity demanded. The price elasticity of demand can be calculated using the formula: Percentage Change in Quantity Demanded / Percentage Change in Price. In this case, the commodity has an elastic demand with a price elasticity of demand of -1.25, meaning that a small change in price leads to a relatively larger change in the quantity demanded.
When the demand for a commodity is said to be inelastic, it means that a change in the price of the commodity has little or no effect on the quantity demanded. In other words, the demand is relatively insensitive to price changes.
Calculation of Price Elasticity of Demand
Given that the demand for a commodity rises by 25% due to a 20% fall in its price, we can calculate the price elasticity of demand using the following formula:
Price Elasticity of Demand = Percentage Change in Quantity Demanded / Percentage Change in Price
Using the values given in the question, we get:
Price Elasticity of Demand = 25% / -20% = -1.25
Interpretation of Price Elasticity of Demand
Since the value of price elasticity of demand is negative, we know that the commodity has an elastic demand. This means that a small change in price leads to a relatively larger change in the quantity demanded.
In this case, the price elasticity of demand is -1.25. This means that a 1% change in the price of the commodity results in a 1.25% change in the quantity demanded.
Conclusion
In conclusion, when the demand for a commodity is said to be inelastic, a change in price has little or no effect on the quantity demanded. The price elasticity of demand can be calculated using the formula: Percentage Change in Quantity Demanded / Percentage Change in Price. In this case, the commodity has an elastic demand with a price elasticity of demand of -1.25, meaning that a small change in price leads to a relatively larger change in the quantity demanded.
Community Answer
When the demand for a commodity is said to be inelastic ? As a result ...
The demand of a good is said to inelastic when it's elasticity is less than one
elasticity is 1.25, elastic
elasticity is 1.25, elastic
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When the demand for a commodity is said to be inelastic ? As a result of a 20 percent fall in the price of a commodity it's demand rises by 25 per cent calculate the price elasticity of demand?
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When the demand for a commodity is said to be inelastic ? As a result of a 20 percent fall in the price of a commodity it's demand rises by 25 per cent calculate the price elasticity of demand? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about When the demand for a commodity is said to be inelastic ? As a result of a 20 percent fall in the price of a commodity it's demand rises by 25 per cent calculate the price elasticity of demand? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the demand for a commodity is said to be inelastic ? As a result of a 20 percent fall in the price of a commodity it's demand rises by 25 per cent calculate the price elasticity of demand?.
When the demand for a commodity is said to be inelastic ? As a result of a 20 percent fall in the price of a commodity it's demand rises by 25 per cent calculate the price elasticity of demand? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about When the demand for a commodity is said to be inelastic ? As a result of a 20 percent fall in the price of a commodity it's demand rises by 25 per cent calculate the price elasticity of demand? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the demand for a commodity is said to be inelastic ? As a result of a 20 percent fall in the price of a commodity it's demand rises by 25 per cent calculate the price elasticity of demand?.
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