Identify the coefficient of price-elasticity of demand when the percentage increase in the quantity of a good demanded is smaller than the percentage fall in its price _________.

equal to one

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greater than one

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smaller than one

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zero

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Solution

The correct option is C smaller 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.
$\Rightarrow$ The coefficient of price-elasticity of demand is smaller than one when the percentage increase in the quantity of a commodity demanded is smaller than the percentage fall in its price.
$∴$ Identify the coefficient of price-elasticity of demand when the percentage increase in the quantity of a good demanded is smaller than the percentage fall in its price smaller than one.

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