Question

3. When the price of rice goes up by 10 % its demand falls from 800 units to 600 units. Calculate price elasticity of demand?

Answer 1

Answer:

Price elasticity of demand = 1.25

Explanation:

Given

Initial quantity (d1)- 800

Quantity after an increase in price (d2)- 600

Increase in Price- 10%

To find

Price elasticity of demand

Solution

Change in Demand (Qd) = d1-d2= 800-600= 200

Change in Demand in %= Qd   x 100= 200 x 100= 25%

                                            d1               800

Price elasticity of demand= change in quantity in % = 25   = 1.25

                                                change in price in %         20