Question

For the following, please answer "True" or "False" and explain why.


Because demand curves slope downward according to the Law of Demand, the price elasticity of demand is a negative number.

Answer 1

Answer- True

Explanation -:
* Law of Demand -:
The law of demand states that there is an inverse proportional relationship between price and demand of a commodity. When the price of commodity increases, its demand decreases.

* Price Elasticity of demand -:
It is the numerical measure of degree of responsiveness in quantity demanded due to change in price of that commodity. It is measured by following equation-:

* From above we can say that Price Elasticity of Demand (PED) is negative, i.e. price and demand have an inverse relationship. This is because the ratio of changes of the two variables is in opposite directions, so if the price goes up, demand goes down and the change will end up negative.