Elasticity of demand refers to:
AThe level of demand at the equilibrium price
BThe degree of responsiveness of demand to a change in its determinants
CThe slope of the supply curve
DThe price at which demand is zero
Answer & Solution
Correct answer: B. The degree of responsiveness of demand to a change in its determinants
1. The textbook says elasticity means sensitiveness or responsiveness.
2. Elasticity of demand explains the change in demand due to a change in its determinants.
3. It is therefore a measure of responsiveness, not of level.
_Source: ICMAI BoS CMA Foundation Paper 4 (Business Economics & Management), Module 1 §1.3 (Theory of Demand) + §Elasticity of Demand, p. 33-46_
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