Question

Suppose there was a 4% decrease in the price of a good and as a result, expenditure on the good increased by 2%. What can you say about elasticity of demand?

Solution

Since fall in price has led to rise in expenditure, i.e., both price and expenditure move in the opposite direction, elasticity of demand is greater than unity (e_D > 1).

Some More Questions From Theory Of Consumer Behaviour Chapter

What is meant by marginal rate of substitution (MRS)?

Why is MRS always diminishing?

When does a consumer attain equilibrium according to indifference curve approach?

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Theory Of Consumer Behaviour

Suppose there was a 4% decrease in the price of a good and as a result, expenditure on the good increased by 2%. What can you say about elasticity of demand?

Some More Questions From Theory Of Consumer Behaviour Chapter

What is meant by marginal rate of substitution (MRS)?

Why is MRS always diminishing?

When does a consumer attain equilibrium according to indifference curve approach?

Give meaning of demand.

Name two determinants of demand.

List the factors that cause changes in demand.

What is law of demand?

What is demand schedule?

Why does demand curve slope downwards?

Differentiate between substitute and complementary goods.

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