Which one of the following relationships regarding price elasticity coefficient with changes in price and change in total revenue is incorrect? 

The incorrect option is 2

Key Points

Elasticity coefficient

• This refers to that measure of the percentage change in quantity demanded due to a change in price.

Degrees of Price Elasticity of Demand:

Perfectly Elastic Demand:

• When a small change in price results in an infinite change in the quantity sought, this is considered to be a case of perfectly elastic demand. (ed=∞)

Perfectly Inelastic Demand:

• No matter how much a commodity's price rises or falls, under a perfectly inelastic demand, the amount sought stays the same.
• In this scenario, the elasticity of demand will be equal to zero (ed = 0).

Unitary Elastic Demand:

• When a given proportionate change in price level results in an equivalent proportionate change in quantity required, the demand is said to be unitary elastic.
• Unitary elastic demand has a value of exactly one. (ed = 1).

Relatively Elastic Demand:

• A situation where a little change in price results in a large change in the amount sought is referred to as having somewhat elastic demand.
• The elasticity of demand in this situation is said to be greater than one (ed > 1).

Relatively Inelastic Demand:

• A given percentage change in price results in a substantially smaller percentage change in quantity demanded when the demand is highly inelastic.
• In such a case elasticity of demand is said to be less than one (ed < 1)

Important PointsRevenue = Price × Quantity