Question

# What will be the effect of 10 per cent rise in price of a good on its demand if price elasticity of demand is (a) Zero (b) -1 (c) -2

Solution

## (a) If price elasticity of demand (Ed) is zero, it implies that demand for the good remains constant regardless of change in price.  (b) When price elasticity of demand (Ed) is -1, 10 per cent rise in price of a goods causes a fall in its demand by 10 units.  (c) When price elasticity of demand (Ed) is -2, 10 per cent rise in price of a goods causes a fall in its demand by 20 units.

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