Question

14. When price of a good rises from 5 per unit to 6 per unit, its demand falls from 20 units to 10 units.
Calculate elasticity of demand.
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Answer 1

Answer:

Given, P=Rs.20; P

1

=Rs.23;

△P=P

1

−P=Rs.23−Rs.20=Rs.3

Percentage change in price =

P

△P

×100=

20

3

×=15 per cent

Percentage change in quantity demanded =(−)30 per cent

Price elasticity of demand (E

d

)=(−)

Percentagechangeinprice

Percentagechangein quantitydemanded

=(−)

15%

−30%

= 2

Price elasticty of demand =2.