Question

Which of the following are characteristics of resources with elastic demand?

		Revenue moves in the opposite direction from price
		Revenue increases as the quantity supplied increases
		Their contribution to GDP increases as the quantity supplied increases
		Substitutes are readily available
		Price moves in the same direction as quantity
		Price and quantity are unrelated
		Small % changes in price lead to larger % changes quantity
		Prices tend to be stable
		Demand tends to be stable
		Demand is highly responsive to price

Answer 1

For Elastic demand

As Elasticity of demand = %∆ in Q/%∆ in P

So small changes in price leads to larger changes in Quantity Demanded.

Thus demand is unstable

demand is highly responsive to price .

Small % change in price leads to larger % changes

Substitutes are readily available

.

For Elastic demand, if P rises, Q falls, TR falls

P falls, Q rises, TR rises

revenue moves in opposite direction from price

As Quantity supplied rises, revenue rises

their contribution to GDP rises

prices tend to be stable