SOLVED MULTIPLE CHOICE QUESTIONS BASED ON PRODUCTION POSSIBILITY CURVE

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SHIFTS & ROTATIONS IN PRODUCTION POSSIBILITY CURVE

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Income Elasticity: Luxury Goods, Necessity Goods, and Inferior Goods.

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  Learning Contents:                                                               ·         Understanding Income Elasticity with respect of luxury goods, necessity goods and inferior goods. The demand for a commodity not only depends on the price of a commodity but also the income level of the consumer. It is a general understanding that a consumer usually prefers to spend more when his income rises and less when his income falls. Sometimes, we might also experience a fall in the demand of certain goods and services even when income rises. Therefore, income elasticity varies with respect to different types of goods and services. The income elasticity measures the percentage change in quantity demanded as a result of percentage change in the income of the consumer. The formula of income elasticity of demand is, The income elasticity measures the demand’s sensitivity or responsiveness to the change in income.   In simple words, it measures to what extent demand changes as a result o
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Introduction to Elasticity of Demand

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Learning Contents: ·          Concept of Demand and Elasticity of Demand ·          Various Concepts of Elasticity of Demand ·          Concept of Elastic and   Inelastic Demand   Concept of Demand and Elasticity of Demand The Law of demand explains that, keeping other factors constant, demand for a commodity is inversely related to its price. In other words, if the price for a commodity rises, the quantity demand decreases. On the other hand, if price falls, quantity demand increases. Therefore, the concept of demand focuses on the direction of change i.e. how demand changes due to a change in price. In simple words, it explains that demand either increases or decreases as a result of a change in price but it overlooks an important aspect i.e. degree of change in demand i.e. How much or to what extent demand changes due to change in price? The degree of change is explained by the elasticity of demand. Therefore,
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