Question

Which of the following statements is correct?

1) i. if a percentage change in price results in a greater percentage change in quantity demanded, then demand is elastic
2) ii. in the range of prices in which the demand for a good is elastic, total revenue (or expenditures) will decrease if price decreases
3) iii. along a linear demand curve, demand is elastic above the mid-point and inelastic below the mid-point
4) iv. total revenue will not change as a result of a change in price if demand is unit elastic

Answer 1

The correct statement is: i. If a percentage change in price results in a greater percentage change in quantity demanded, then demand is elastic.

Step-by-step explanation:

The correct statement is: i. If a percentage change in price results in a greater percentage change in quantity demanded, then demand is elastic. Price elasticity of demand measures how responsive quantity demanded is to a change in price. If a small change in price leads to a relatively large change in quantity demanded, then demand is considered elastic.

For example, let's say the price of a product decreases by 10% and as a result, the quantity demanded increases by 15%. In this case, the percentage change in quantity demanded (15%) is greater than the percentage change in price (10%), indicating elastic demand.

Keywords: price elasticity, quantity demanded, change in price, change in quantity, elastic demand.