Question

if the price elasticity of demand is |0.5|,then the commodity is
(A) luxury
(B) necessary
(C) inferior
(D) giffen​

Answer 1

Answer:

A luxury........,.......q

Answer 2

The answer is Necessity. (option b)

• The given price elasticity of demand is 0.5 which is a value less than 1, so the demand of the commodity is inelastic.
• It is when "percentage change in the demand of a commodity is less than the percentage change in its price".
• If the price elasticity for any commodity is less than 1, it's called relatively inelastic.
• Necessities are generally inelastic because of their limited use and almost fixed demand. Price changes don't have much effect on their demand. Change in their demand is less than the change in their prices.