Question

As price of a commodity increases from rs.4 per unit to rs.5 per unit, demand falls from 20 units to 10 units. Find out the elasticity of demand

Answer 1

Ed = Percentage change in quantity demanded / percentage change in price

Ed= 50/25

Ed=2

Answer 2

It is given that if the price of a commodity increases from 4 to 5 Rs, so as the demand for the commodity falls from 20 to 10 units.

We have to find out the Elasticity of Demand.

The percentage change in price = (change in price / original price ) X 100

= (1 / 4) X 100

= 25%

The percentage change in quantity = (change in quantity / original quantity ) X 100

= (10 / 20 ) X 100

= 50%

The elasticity of demand = % change in quantity / % change in price

= 50 / 25  

= 2

The elasticity of demand is 2.

The elasticity of demand comes after dividing the percentage change in quantity with the percentage change in price. Thus, the elasticity of demand is 2.