Question

( 16. A consumer spends * 100 on a good priced at
4 per unit. When price fall by 50 percent,
the consumer continues to spend 100 on the
good. Calculate price elasticity of demand by percentage method​

Answer 1

Answer:

Explanation:

The correct answer is

GIVEN  :   P=4

   total expenditure = 100

  Q = 4E/P = 100/4  = 25

When P falls by 50%  then P1=2, anfd TE=100

Q1= TE/P1 = 100/2 =50

eD =%CHANGE IN QUANTITY DEMAND / % CHANGE IN PRICE

eD = 100/50 = 2

eD = 2>  HIGHLY ELASTIC DEMAND