Question

a consumer Spends rs 40 on a good at a price of rs 1 per unit and rs 60 at a price elasticity of demand? what kind of good it's ?​

Answer 1

Answer:

eD =1.25 > 1 or highly elastic

Explanation:

p=rs 5 total expenditure =rs 60

therefore Q=TE/P =60/5=12

P decrease by 20%

P1= 20% less of rs 5 = rs 4

Q1=TE/P1 = 60/4=15

Now question is : P=5 , P1 =4 OR 20% less

Q=12 ,Q1= 15 i.e., 25%

now eD =% change in QD / %change in price

eD=25/20 = 1.25

eD =1.25 > 1 or highly elastic

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