A consumer spends Ry 1000 on a good, price at Rs 10 per unit. When it price falls by 20%, the consumer spends Rs 800 on the goods. Find the price elasticity of the demand
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Initial price (P)=Rs.10
Fall in price by 20 per cent =10×10020=Rs.2
New price (P1)=Rs.10−Rs.2=Rs.8
Price (Rs.) Expenditure (Rs.) Quantity Demanded
10 1,000 101,000
=100
8 800 8800=100 Percentage change in quantity demanded =Q△Q×100=100100 −100 ×100=1000
×100=0
Price elasticity of demand (Ed) =(−)Percentage change in
price Percentage change in quantity demanded
=(−)20%0
=0
Price elasticity of demand =0 (zero).
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