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WAEC Economics 1995 Question 16

Question 16

Elasticity

The effect of an increase in price on the demand for a commodity with elastic demand will be

  1. A.an increase in the demand for the commodity
  2. B.a decrease in the demand for the commodity
  3. C.a further increase in the price of the commodity
  4. D.reduction in the number of distributors of the commodity
  5. E.a general increase in the cost of production
Show the answer and explanation

Answer: B (a decrease in the demand for the commodity)

Explanation

When demand is elastic, a price rise causes a more than proportionate fall in quantity demanded.