Question
Which of the following statements regarding the concept
of elasticity of demand is correct: If the price elasticity of demand is greater than 1, the demand is considered elastic. In the case of unitary elastic demand, total revenue remains unchanged with price changes. Perfectly elastic demand implies that consumers will continue to demand the same quantity of goods regardless of any price changes. Which of the statements given above are correct?Solution
Explanation:
- Statement A is correct: If price elasticity of demand is greater than 1 , the demand is considered elastic .
- Statement 2 is correct: When demand is unitary elastic (elasticity = 1) , total revenue remains unchanged despite price changes.
- Statement 3 is in correct: A perfectly elastic demand curve means that at a particular price, demand is infinite , but if the price changes, demand falls to zero. The statement above describes a situation of perfectly inelastic demand.
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