Micro

Consumer Behaviour

Medium

The price of a commodity increases by 10%, its demand drops by 12%. What is the nature of price elasticity of demand?

Price Inelastic.

Price Elastic.

Unit Elastic.

Income elastic.

✅ Correct Option: 2

Option 1 -> Price Inelastic means demand changes less proportionally than price (elasticity < 1).

Option 2 -> Price Elastic means demand changes more proportionally than price (elasticity > 1).

Option 3 -> Unit Elastic means demand changes proportionally equal to price (elasticity = 1).

Option 4 -> Income elastic refers to income elasticity, not price elasticity.

Hence, Option 2: Price Elastic -> Price elasticity of demand = (% change in demand / % change in price) = (-12% / 10%) = -1.2. The absolute value is 1.2, which is greater than 1, indicating that demand is price elastic. This means demand is responsive to price changes - a small percentage change in price leads to a larger percentage change in quantity demanded. -> correct

2026: 23 May Shift 1

Which one of the following statements is most suitable to the law of diminishing marginal utility?

2026: 31 May Shift 1

If the income effect is stronger than the substitution effect, the demand for the good would be positively related to its price. Such goods are called:

2025: 29 May Shift 1

Arrange the following stages of Consumer's Equilibrium in the correct sequence under the utility analysis

(A) Marginal Utility becomes equal to the price of a commodity

(B) Marginal utility, derived from a commodity X is greater than Px

(D) The consumer reallocates expenditure to maximize satisfaction.

Choose the correct answer from the options given below:

2025: 21 May Shift 1

Match List-I with List-II

List-I	List-II
(A) Budget line	(I) $-\frac{p_1}{p_2}$
(B) Budget constraint	(II) Bundles available to the consumer
(C) Budget set	(III) $p_1X_1 + p_2X_2 = M$
(D) Slope of budget line	(IV) $p_1X_1 + p_2X_2 \leq M$

Choose the correct answer from the options given below:

2026: 13 May Shift 1

Suppose Prachi buys 30 bananas when its price is Rs. 10 per banana. When the price increases to Rs. 14 per banana, she reduces her demand to 24 bananas. What is the price elasticity of demand in absolute terms?

2025: 2 June Shift 1

The Law of Diminishing Marginal Utility states that when more and more units of a commodity are consumed, Marginal Utility __________

The price of a commodity increases by 10%, its demand drops by 12%. What is the nature of price elasticity of demand?

Solution

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