Question

9. Suppose you calculate the price elasticity of demand for a certain good and you report that the elasticity 18 V.O. The fact that the elasticity is a positive number means that a. when the price of the good increases, the quantity demanded increases in response. b. demand for the good is elastic. c. you have dropped the minus sign and reported the absolute value of the elasticity d. the good has close substitutes and/or the good is a luxury.

Answer 1

Ans) Price elasticity of demand is the responsiveness of quantity demanded with change in price. Price elasticity of demand in general and nearly always is negative. Positive price elasticity is quite uncommon. An example of positive price elasticity is caviar. People who purchase caviar are generally wealthy and they think that more expensive the caviar, the better quality it is of.

Sometimes we also drop the negative sign on purpose to report the absolute value, as negative sign only shows that as the price increases, quantity demanded decreases.

So both the option a and c can be potential answers. But since positive elasticity does exist, most appropriate answer is option a.

2)

Formula for price elasticity of demand using mid point method 7 elektron] [Gates] L 2100 , = -0.64 Coptoon d és correct)

3)

Formula of price elasticity of demand using mid point method a rreo-100 = [] : [3] =-0.67 Coption b)