Question

A 3% fall in the price of x leads to a 9% rise in its demand. A 5% rise in the price of y leads to a 5% falls in its demand. calculate the price elasticity of demand for x and y.

Answer 1

Solution:

Given:

=> % Change in demand of good x = 9%.

=> % Change in price of good x = 3%.

=> % Change in demand of good y = 5%.

=> % Change in demand of good y = 5%.

To Find:

=> Ped of x and y.

Formula used:

$\sf{\implies -Ped = \dfrac{\% \;change\;in\;demand}{\%\;change \;in\;price}}$

For good x:

$\sf{\implies -Ped(x) = \dfrac{\% \;change\;in\;demand}{\%\;change \;in\;price}}$

$\sf{\implies -Ped(x)=\dfrac{9\%}{3\%}}$

${\boxed{\boxed{\sf{\sf{\implies Ped(x) = -3}}}}}$

For good y:

$\sf{\implies -Ped(y) = \dfrac{\% \;change\;in\;demand}{\%\;change \;in\;price}}$

$\sf{\implies -Ped(y)=\dfrac{5\%}{5\%}}$

${\boxed{\boxed{\sf{\sf{\implies Ped(y) = -1}}}}}$