If the price of the goods fall by 20% , but there is no change in its quantity demanded by the
given consumer then its elasticity of demand will be equal to :
A. One
B. Zero
C. Less than one
D. Greater than one
Answers
Answer:
Key Points
The PED is the percentage change in quantity demanded in response to a one percent change in price.
The PED coefficient is usually negative, although economists often ignore the sign.
Demand for a good is relatively inelastic if the PED coefficient is less than one (in absolute value).
Demand for a good is relatively elastic if the PED coefficient is greater than one (in absolute value).
Demand for a good is unit elastic when the PED coefficient is equal to one.
Key Terms
elastic: Demand for a good is elastic when a change in price has a relatively large effect on the quantity of the good demanded.
Unit Elastic: Demand for a good is unit elastic when the percentage change in quantity demanded is equal to the percentage change in price.
inelastic: Demand for a good is inelastic when a change in price has a relatively small effect on the quantity of the good demanded.