Suppose the price elasticity of demand for a good is –0.2. How will the demand for the good be affected if there is a 10% increase in the price of the good? Option 1: Demand increased by 0.02 % Option 2: Demand decreased by 20 % Option 3: Demand increased by 2 % Option 4: Demand decreased by 2 %

Answer: Demand decreased by 2 %. Solution: Price elasticity of demand e_d = (% Q)/(% P). Given e_d = -0.2 and % P = 10%, we get % Q = -0.2 x 10 = -2%. So demand decreases by 2%.

Micro

Consumer Behaviour

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Suppose the price elasticity of demand for a good is –0.2. How will the demand for the good be affected if there is a 10% increase in the price of the good?

Demand increased by 0.02 %

Demand decreased by 20 %

Demand increased by 2 %

Demand decreased by 2 %

✅ Correct Option: 4

Price elasticity of demand $e_d = \frac{\%\Delta Q}{\%\Delta P}$ . Given $e_d = -0.2$ and $\%\Delta P = 10\%$ , we get $\%\Delta Q = -0.2 \times 10 = -2\%$ . So demand decreases by 2%.

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(A) An indifference curve reflects same utility level with different combinations.

(B) Indifference curve are downward sloping from right to left.

(D) Two indifference curve never intersect each other.

Choose the correct answer from the options given below:

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Elasticity of demand is constant and equal to 1 at every point on the demand curve. The shape of such a demand curve would be :

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Match List-I with List-II

List-I	List-II
(A) Slope of Budget line	(I) $P_1X_1 + P_2X_2 \leq M$
(B) Horizontal intercept of budget line	(II) $M/P_2$
(C) Vertical intercept of budget line	(III) $-\frac{P_1}{P_2}$
(D) Budget constraints	(IV) $M/P_1$

Choose the correct answer from the options given below:

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In the cardinal utility analysis, the marginal utility of money is considered to be

Suppose the price elasticity of demand for a good is –0.2. How will the demand for the good be affected if there is a 10% increase in the price of the good?

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