Question

A Consumer spends Rs. 100 on a good priced Rs 4. When its price falls by 25%, the consumer
spends Rs.75 on the good. Calculate price elasticity of demand by the percentage method.​

Answer 1

Answer:

pls see the attachment above

Answer 2

Answer:

Initial price (P)=Rs.4

Fall in price by 25 per cent =4×

100

25

=Rs.1

New price (P

1

)=Rs.4−Rs.1=Rs.3

Price (Rs.) Expenditure (Rs.) Quantity Demanded (Units)

4 100

4

100

=25

3 75

3

75

=25

Percentage change in quantity demanded =

Q

△Q

×100=

25

25−25

×100=

25

0

×100=0

Price elasticity of demand (E

d

)=(−)

Percentage change in price

Percentage change in quantity demanded

=(−)

−25%

0

=0

Price elasticity of demand =0 (zero).