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Question

# Q. If the demand for a good is said to be price elastic, then it will necessarily imply-

A

Demand for the good will decrease with decrease in its price.
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B

Demand for the good will increase with increase in consumer’s income.
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C

Supply of the good will increase in response to increased price of the good.
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D

Demand for the good will not respond to the changes in its price.
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Solution

## The correct option is A Demand for the good will decrease with decrease in its price.Explanation: Option (a) is correct: Price elasticity of demand denotes the change in demand for a change in the price of the good. Hence increase or decrease in demand is related to increase or decrease in the price for the commodity. It is given by the following equation Price elasticity of demand = % change in the quantity demanded / % change in the price. Option (b) is incorrect: Income elasticity of demand means responsiveness of the quantity demanded for a good to a change in consumer income. It is given by the following equation Income elasticity of demand = % change in the quantity demanded % change in the income. Option (c) is incorrect: Price elasticity of supply denotes the change in the supply for a change in the price of the good. Hence, increase or decrease in supply is related to increase or decrease in the price for the commodity. It is given by the following equation Price elasticity of supply = % change in the quantity supplied / % change in price. Option (d) is incorrect: Price inelastic demand means that the demand is static and is not subjected to the changes of the price.

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