If price increases by 5% and the quantity demanded reacts by fallingby 10%, the demand for that product should be classified into whichcategory of PED?

To classify the demand based on the given price elasticity of demand (PED) information, we can follow these steps:

1. Break Down the Problem

We need to calculate the price elasticity of demand (PED) using the provided changes in price and quantity demanded.

2. Relevant Concepts

The formula for price elasticity of demand (PED) is given by:

$PED = \frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}}$

3. Analysis and Detail

1. Percentage change in quantity demanded: This is given as a fall of 10%, which is $-10\%$.
2. Percentage change in price: This is given as an increase of 5%, which is $5\%$.

Now, substitute these values into the PED formula:

$PED = \frac{-10\%}{5\%} = -2$

4. Verify and Summarize

The calculated PED of $-2$ indicates that the demand is elastic, as the absolute value is greater than 1.

Final Answer

Since the absolute value of the PED is $2$ (which is greater than 1), the demand for that product should be classified as elastic demand.