The price of a good falls from Rs 10 to Rs 8 and the quantity demanded rises from 50 units to 60 units. Which of the following statements is NOT correct?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → The demand for the good is elastic at this price.
Given:
Price: Rs 10 to Rs 8
Quantity demanded: 50 units to 60 units
Price elasticity of demand = percentage change in quantity ÷ percentage change in price.
Option (1) The percentage change in quantity demanded is 20%. — True. (60 − 50) / 50 × 100 = 20%.
Option (2) The price elasticity of demand (absolute value) is 1. — True. 20% ÷ 20% = 1.
Option (3) The percentage change in price is 20% (a fall). — True. (10 − 8) / 10 × 100 = 20%.
Option (4) The demand for the good is elastic at this price. — False. Equal percentage changes make demand unit elastic; elastic demand needs |eD| more than 1.
NCERT (2026-27): “2.6 Elasticity of Demand … When the percentage change in quantity demanded is less than the percentage change in market price, eD is estimated to be less than one and the demand for the good is said to be inelastic at that price. … When the percentage change in quantity demanded equals the percentage change in its market price, eD is estimated to be equal to one and the demand for the good is said to be Unitary-elastic at that price. …” |