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Question

Which one of the following is correct?
1. Elasticity of demand states the relationship between price and demand
2. Elasticity of demand explains the degree of responsiveness of demand to change in price
3. Elasticity states the inverse relationship between price and demand
4. Elasticity of demand explains the direct relationship between price and demand


A
1 alone is correct
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B
2 alone is correct
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C
1 and 3 are correct
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D
2 and 4 are correct
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Solution

The correct option is B 2 alone is correct
Elasticity of demand explains the degree of responsiveness of demand to change in price- this is the only correct statement among the following since elasticity of demand is calculated by dividing the proportionate change in quantity demanded by the proportionate change in price.

Economics

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