Chapter3: Supply And Demand: Theory
Section: Chapter Questions
Problem 20QP
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Question
Discuss wether a fall in price of a product will always be accompanied by a reduction in the quantity traded of that product.
Expert Solution
Step 1
Price elasticity of demand refers to the degree of responsiveness of the quantity demanded of the good in response to change in income of the consumer, price of the good or price of related goods. It is calculated by dividing the percentage quantity demanded by the percentage change in the determinant. The various types of elasticity are: Inelastic demand, elastic demand, unitary elastic demand, perfectly elastic demand and perfectly inelastic demand. It can be calculated from mid point method, point method and expenditure method.
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