Question

According to percentage method or arithmetic method of elasticity of demand, If percentage change in quantity demanded is less than percentage change in price, the elasticity is said to be ________________.

• A. Unitary (i.e. one)
• B. Less than one
• C. Greater than one
• D. None of the above

Answer 1

The correct option is B Less than one

$\Rightarrow$ The price elasticity of demand is the percentage change in the quantity demanded of a good or service divided by the percentage change in the price.

$\therefore$ $E_d=\frac{\%changeinquantity}{\%changeinprice}$

In question it is given that,

$\Rightarrow$ $\%$ change in quantity $<$ $\%$ change in price

Then, $E_d<1$

$\therefore$ According to percentage method or arithmetic method of elasticity of demand, If percentage change in quantity demanded is less than percentage change in price, the elasticity is said to be Less than one.