Question

Im confused on these questions, can you explain?

If the price elasticity of demand is -10, a 10 percent decrease in price will increase quantity demanded by

A. 0.1 Percent B. 10 percent C. 100 percent D 1 Percent E. 20 percent

As a individual consumes more of a particular commodity, the total level of utility derived from that consumption usually

A. Increases at an increasing rate

B. Increases at a decreasing rate

C. Increases at a constant rate

D. Decreases at an increasing rate.

Answer 1

1. Option C. 100 percent

Explanation: % change in quantity demanded = % change in price * price elasticity of demand = 10% * 10 = 100%

2. B. Increases at a decreasing rate

Explanation: When one consumes more units of a good, the marginal utility keeps falling due to diminishing marginal utility. So, the total utility increases at a decreasing rate.