Question : Statement 1: When the price of a product increases by 10%, and its quantity demanded decreases by 5%, the price elasticity of demand is - 0.5.
Statement 2: The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.
Option 1: Both statements are true.
Option 2: Both statements are false.
Option 3: Statement 1 is true, and statement 2 is false.
Option 4: Statement 1 is false, and statement 2 is true.
Correct Answer: Both statements are true.
Solution : The correct answer is indeed (A) Both statements are true.
Statement 1: When the price of a product increases by 10%, and its quantity demanded decreases by 5%, the price elasticity of demand is -0.5.
This statement is true. The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, the price increased by 10% (a positive change) and the quantity demanded decreased by 5% (a negative change). Dividing -5% by 10% gives us -0.5, indicating an elastic response in quantity demanded to the change in price.
This statement is also true. The price elasticity of demand is indeed calculated by dividing the percentage change in quantity demanded by the percentage change in price.
Therefore both statements are true.
Question : Statement 1: Elasticity of demand measures the sensitivity of quantity demanded to changes in price.
Statement 2: If the percentage change in price is greater than the percentage change in quantity demanded, demand is considered elastic.
Question : Statement 1: The concept of price elasticity of demand measures the responsiveness of quantity demanded to changes in income.
Statement 2: Price elasticity of demand can be calculated by dividing the percentage change in quantity demanded by the percentage change in price.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statement 1 and statement 2 are true.
Option 4: Both statement 1 and statement 2 are false.
Question : Statement 1: Price elasticity of demand can be calculated by dividing the percentage change in quantity demanded by the percentage change in price.
Statement 2: The formula for price elasticity of demand is (ΔQ/ΔP) * (P/Q).
Question : Statement 1: If the price elasticity of demand for a product is -1.5, a 10% increase in price will result in a 15% decrease in quantity demanded.
Statement 2: The absolute value of the price elasticity of demand represents the percentage change in quantity demanded for a 1% change in price.
Question : Statement 1: The price elasticity of demand for a product is zero when quantity demanded does not change with a change in price.
Statement 2: Zero price elasticity indicates a vertical demand curve.
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