A 50% increase in the quantity demanded of a commodity, following a 100% decrease in
A 50% increase in the quantity demanded of a commodity, following a 100% decrease in its price, shows that the commodity has
- A) fairly elastic demand
- B) unitary elastic demand
- C) inelastic demand
- D) perfectly elastic demand
Correct Answer: C) inelastic demand
Explanation
This question is asking about how changes in price affect the quantity of a commodity that people want to buy. When the price of a commodity goes down, it usually means that people will want to buy more of it. This question is asking about how much more.
The question gives us some numbers to work with. It tells us that the price of the commodity went down by 100%, which means that the price was cut in half (since 100% of something is the whole thing). It also tells us that the quantity demanded of the commodity went up by 50%.
To figure out what kind of demand this represents, we need to use the concept of elasticity. Elasticity refers to how much the quantity demanded of a commodity changes in response to changes in price. If the quantity demanded changes a lot when the price changes a little, then we say that demand is elastic. If the quantity demanded changes only a little when the price changes a lot, then we say that demand is inelastic.
In this case, we know that the price changed a lot (it went down by 100%) and the quantity demanded changed a little (it went up by 50%). This means that demand is inelastic, since the quantity demanded did not change very much in response to the price change.
Therefore, the correct answer to this question is Option C: inelastic demand.