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InterviewSolution
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(11) Given the price elasticity of demand for a good as 0.6. Suppose price of this gooddecreases by 10%, what would we expect to happen to the quantity demanded?Assignment Bnswer the following Middle Category questions in about 250 words each. Eachaestion carries 10 marks.3 x 10 = 30A rent ceiling prohibits charging rent that exceeds the ceiling amount. Supposegovernment decides to put a rent ceiling.(a) With the help of a diagram show the effect of a rent ceiling on the supply and demandof a rented house if the ceiling is set below the market equilibrium rent.b) What will be the resultant effects on supply and demand of a rented house if theceiling is set above the market equilibrium rent?OR |
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Answer» Answer: Inelastic demand occurs when changes in PRICE cause a disproportionately SMALL change in quantity demanded. For example, a good with inelastic demand might see its price increase by 30%, but demand DROP by only 10% as a RESULT. |
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