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Question

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

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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.

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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