If the elasticity of demand for a product is -2, what does this indicate about t

₹0.0

Question: If the elasticity of demand for a product is -2, what does this indicate about the demand?

Options:

Correct Answer: Elastic

Solution:

An elasticity of -2 indicates that demand is elastic, meaning quantity demanded changes significantly with price changes.

If the elasticity of demand for a product is -2, what does this indicate about the demand?

If the elasticity of demand for a product is -2, what does this indicate about the demand?

Step 1: Understand what elasticity of demand means. It measures how much the quantity demanded of a product changes when the price changes.
Step 2: Note that elasticity is usually expressed as a negative number because price and quantity demanded move in opposite directions.
Step 3: A value of -2 means that for every 1% increase in price, the quantity demanded decreases by 2%.
Step 4: Since the absolute value of -2 is greater than 1, this indicates that the demand is elastic.
Step 5: Elastic demand means that consumers are very responsive to price changes; a small change in price leads to a large change in quantity demanded.

Price Elasticity of Demand – The responsiveness of quantity demanded to a change in price, where a negative value indicates an inverse relationship.