Question : When the price of a good increases by 10%, and the quantity demanded decreases by 5%, what is the price elasticity of demand?
Option 1: 0.2
Option 2: 0.5
Option 3: 1.0
Option 4: 2.0
Correct Answer: 0.5
Solution : The correct answer is (b) 0.5
The price elasticity of demand can be calculated using the formula:
Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)
In this case, the price increases by 10% and the quantity demanded decreases by 5%. Plugging these values into the formula, we get
Price Elasticity of Demand = (-5%) / (10%) = -0.5
The negative sign indicates that the demand is price inelastic. However, the question asks for the absolute value.
Question : The quantity demanded of a good decreases from 200 units to 160 units when the price increases from INR 20 to INR 25 per unit. Calculate the price elasticity of demand.
Option 1: 0.5
Option 2: 1.0
Option 3: 1.5
Question : The quantity demanded of a good decreases from 400 units to 300 units when the price increases from INR 20 to INR 30 per unit. Calculate the price elasticity of demand.
Option 1: -0.5
Option 2: -1.0
Option 3: -1.5
Option 4: -2.0
Question : If the price elasticity of demand for a good is -0.5, then a 10% increase in price will result in a:
Option 1: 0.5% decrease in quantity demanded.
Option 2: 5% decrease in quantity demanded.
Option 3: 0.5% increase in quantity demanded.
Option 4: 5% increase in quantity demanded.
Question : The quantity demanded of a good increases from 500 units to 600 units when the price decreases from INR 10 to INR 8 per unit. Calculate the price elasticity of demand.
Option 1: 0.6
Option 3: 1.2
Question : If the price of a product increases from INR 50 to INR 60 per unit, and the quantity demanded decreases from 100 units to 80 units, calculate the price elasticity of demand.
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