A consumer buys 40 units of a commodity at price ₹5 per unit and the price elasticity of 3
demand is -1.5. Calculate the amount he will buy at price ₹4 per unit of the commodity.
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Explanation:
Price (Rs.) Total Expenditure (Rs.) Quantity Demanded (Units)
4
3 200
300
4
200
=50
3
300
=100
Change in Price Percentage Change in Price Change in Demand Percentage Change in Demand
Rs.4 to Rs.3
4
3−4
×100=−24% 50 units and 100 units
50
100−50
×100=100%
Price elasticity of demand (E
d
)=(−)
Percentage change in price
Percentage change in quantity demanded
=(−)
−25%
100%
=4.
Price elasticity of demand =4.
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