Question

Point elasticity is useful for which of the following situations?

• A. The bookstore is considering doubling the price of notebooks
• B. A restaurant is considering lowering the price of its most expensive dishes by 50 per cent.
• C. An auto producer is interested in determining the response of consumers to him lowering the price by Rs. 100.
• D. All of the above

Answer 1

The correct option is C An auto producer is interested in determining the response of consumers to him lowering the price by Rs. 100.

$\Rightarrow$ Point elasticity of demand is the ratio of percentage change in quantity demanded of a good to percentage change in its price calculated at a specific point on the demand curve.

$\Rightarrow$ Point elasticity is useful for small change in price or quantity demand.

$\Rightarrow$ So in the given options ,option C is correct as the auto producer is interested to determine the response of consumers with a small change in price of cars that is Rs. 100 which is very smaller when compared to the price of car.