Match List-I with List-II:List-I List-II (A) Price changes but no change in demand (I) Perfectly elastic (ep = ∞) (B) Price remains the same but demand changes (II) Unit elastic (ep = 1) (C) Price and demand change in the same proportion (III) More than elastic (D) Price changes in less proportion than demand (IV) Perfectly inelastic (ep = 0)
(A)-(IV), (B)-(I), (C)-(II), (D)-(III)
Understanding Price Elasticity of Demand
Price Elasticity of Demand ($\text{e}_p$) measures the responsiveness of the quantity demanded of a good to a change in its price. It is calculated as:
$$ \text{e}_p = \frac{\text{\% change in Quantity Demanded}}{\text{\% change in Price}} $$
Based on the value of $\text{e}_p$, demand can be classified into different types. Let's look at the types mentioned in List-II and what they mean:
- (I) Perfectly elastic ($\text{e}_p = \infty$): This occurs when an infinite change in quantity demanded is caused by a negligible or zero change in price. Consumers will buy any quantity at a specific price, but none at a higher price. The demand curve is a horizontal line.
- (II) Unit elastic ($\text{e}_p = 1$): This happens when the percentage change in quantity demanded is exactly equal to the percentage change in price. The total expenditure on the good remains constant when the price changes.
- (III) More than elastic (or Elastic) ($\text{e}_p > 1$): In this case, the percentage change in quantity demanded is greater than the percentage change in price. Consumers are highly responsive to price changes.
- (IV) Perfectly inelastic ($\text{e}_p = 0$): This occurs when the quantity demanded does not change at all, regardless of the change in price. Consumers' demand is completely unresponsive to price changes. The demand curve is a vertical line.
Matching Scenarios to Price Elasticity Types
Now let's match the scenarios described in List-I with the types of elasticity from List-II:
- (A) Price changes but no change in demand: If the quantity demanded does not change even when the price changes, it means demand is completely unresponsive to price changes. This corresponds to Perfectly inelastic demand, where $\text{e}_p = 0$. So, (A) matches (IV).
- (B) Price remains the same but demand changes: This scenario implies that at a given price, the quantity demanded can change infinitely. This high sensitivity to price (specifically, infinite sensitivity to a zero price change) characterizes Perfectly elastic demand, where $\text{e}_p = \infty$. So, (B) matches (I).
- (C) Price and demand change in the same proportion: If the percentage change in price is equal to the percentage change in quantity demanded, it is known as Unit elastic demand, where $\text{e}_p = 1$. So, (C) matches (II).
- (D) Price changes in less proportion than demand: If the percentage change in quantity demanded is larger than the percentage change in price, demand is considered More than elastic (or Elastic), where $\text{e}_p > 1$. So, (D) matches (III).
Summary of Matches
Based on the analysis, the correct matching is:
- (A) - (IV)
- (B) - (I)
- (C) - (II)
- (D) - (III)
| List-I (Scenario) | List-II (Elasticity Type) | Price Elasticity Value ($\text{e}_p$) | Match |
|---|---|---|---|
| (A) Price changes but no change in demand | (IV) Perfectly inelastic | 0 | (A)-(IV) |
| (B) Price remains the same but demand changes | (I) Perfectly elastic | $\infty$ | (B)-(I) |
| (C) Price and demand change in the same proportion | (II) Unit elastic | 1 | (C)-(II) |
| (D) Price changes in less proportion than demand | (III) More than elastic | > 1 | (D)-(III) |
This matching corresponds to the option (A)-(IV), (B)-(I), (C)-(II), (D)-(III).
Revision Table: Types of Price Elasticity of Demand
| Type of Elasticity | $\text{e}_p$ Value | Responsiveness of Demand | Demand Curve Shape |
|---|---|---|---|
| Perfectly Inelastic | $\text{e}_p = 0$ | No change in demand regardless of price change | Vertical line |
| Inelastic (Less than elastic) | $0 < \text{e}_p < 1$ | % Change in Demand < % Change in Price | Steeper curve |
| Unit Elastic | $\text{e}_p = 1$ | % Change in Demand = % Change in Price | Rectangular hyperbola |
| Elastic (More than elastic) | $\text{e}_p > 1$ | % Change in Demand > % Change in Price | Flatter curve |
| Perfectly Elastic | $\text{e}_p = \infty$ | Infinite change in demand for a tiny price change | Horizontal line |
Additional Information on Elasticity
Understanding price elasticity is crucial in economics, especially for businesses and governments. For instance, a firm selling a good with elastic demand knows that a price increase will lead to a relatively larger drop in sales, potentially decreasing total revenue. Conversely, if demand is inelastic, a price increase will cause a smaller percentage drop in sales, likely increasing total revenue.
Factors influencing price elasticity of demand include:
- Availability of Substitutes: Goods with many close substitutes tend to have more elastic demand because consumers can easily switch if the price changes.
- Necessity vs. Luxury: Necessities often have more inelastic demand (e.g., basic food, medicine) than luxuries, as people need to buy them regardless of price.
- Proportion of Income: Goods that constitute a large portion of a consumer's budget tend to have more elastic demand.
- Time Period: Demand tends to become more elastic over longer periods as consumers have more time to find substitutes or adjust their consumption habits.
Important Questions from Forms of Market and Price Determination
The following statements are about measuring poverty. Select the correct statement:
(A) There are many ways of measuring poverty
(B) Poverty may be measured on the basis of monetary value of the minimum calorie intake
(C) Government uses Monthly Per Capita Expenditure as a proxy for income of households to identify the poor
(D) Measures of poverty differ for different sections of society
(E) Factors such as accessibility to basic education, health care, drinking water & sanitation are not considered to develop poverty line
Choose the correct answer from the options given below:
Which among the following statements is not correct about WTO?
Institution which organises the free interaction of individuals pursuing their respective economic activities is called:
Select the correct statement related to Alternate marketing channels:
(A) In the alternate marketing channels, Farmers sell their products directly to consumers.
(B) In the alternate marketing channels, Farmers sell their products directly to the Central Government.
(C) In the alternate marketing channels, Farmers sell their products to the Middle men.
(D) In the alternate marketing channels, Farmers sell their products directly to the whole sale market.
Choose the correct answer from the options given below:
Match List - I with List - II:
List - I List - II (A) Income Method (I) Calculated at current prices (B) Expenditure Method (II) Calculated at constant prices (C) Real GDP (III) Aggregate of final expenditures (D) Nominal GDP (IV) Aggregate of factor incomes Choose the correct answer from the options given below:
