Practicing Success
Arrange the following to represent the order of events i consumer's behaviour due to change in the price of commodity. (A) The quantity demanded of the commodity will increase to 10 units (B) A consumer demands 2 units of a commodity priced at 20 (C) There is a fall in the price of the commodity to 10 (D) The price elasticity of demand will be above 1 Choose the correct answer from the options given below : |
(A), (B), (C), (D) (B), (C), (A), (D) (C), (A), (D), (B) (D), (C), (B), (A) |
(B), (C), (A), (D) |
The correct answer is option (2) : (B), (C), (A), (D) The correct order of events in consumer's behaviour due to a change in the price of a commodity is as follows : 1. A consumer demands 2 units of a commodity priced at ₹20 (B) - This represents the initial demand at the original price . 2. There is a fall in the price of the commodity to ₹10 (C) - A price reduction occurs. 3. The quantity demanded of the commodity will increase to 10 units (A)- with the price drop, demand increases. 4. The price elasticity of demand will be above 1 (D) - The increase in demand suggests elastic demand where the percentage change in quantity demanded is greater than the percentage change in price. eD = percentage change in demand for the good/ percentage change in the price of the good % Change in demand for the good = [(New quantity demanded−Initial quantity demanded) /Initial quantity demanded]×100 = [(10-2)/2] *100 = 400 % Percentage change in price=[(New price−Initial price)/Initial price ]×100 = [(10-20)/10]*100 = -50% |eD| = 400 % /50% = 8 |