The price decreases from INR 2,000 to INR 1,800. Quantity demanded per year increases from 5000 to 6000 units. Which of the following is correct?

The price elasticity of demand is -2

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The good is inferior

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Income elasticity is + 0.5

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Income elasticity is + 2

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Solution

The correct option is A
The price elasticity of demand is -2

A. The percentage change in demand is +20%; the percentage change in price is -10% so the price elasticity of demand is -2.

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The price decreases from INR 2,000 to INR 1,800. Quantity demanded per year increases from 5000 to 6000 units. Which of the following is correct?

The correct option is A The price elasticity of demand is -2 A. The percentage change in demand is +20%; the percentage change in price is -10% so the price elasticity of demand is -2.

The correct option is A
The price elasticity of demand is -2

A. The percentage change in demand is +20%; the percentage change in price is -10% so the price elasticity of demand is -2.