A consumer spends
100 rupees on a good priced at 4 rupees per unit. When its price falls by 25%, the consumer spends
Rupees 75 on the good. Calculate Price elasticity of demand by percentage method.
Answers
Answered by
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Explanation:
Initial price
(
P
)
=
R
s
.
4
Fall in price by
25
per cent
=
4
×
25
100
=
R
s
.
1
New price
(
P
1
)
=
R
s
.
4
−
R
s
.
1
=
R
s
.
3
Price (Rs.) Expenditure (Rs.) Quantity Demanded (Units)
4
100
100
4
=
25
3
75
75
3
=
25
Percentage change in quantity demanded
=
△
Q
Q
×
100
=
25
−
25
25
×
100
=
0
25
×
100
=
0
Price elasticity of demand
(
E
d
)
=
(
−
)
Percentage change in quantity demanded
Percentage change in price
=
(
−
)
0
−
25
%
=
0
Price elasticity of demand
=
0
(zero).
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