Question

At a given market price of agood a consumer buys 120 units. When price falls by50per cent he buys 150 units. calculate price elasticity of demand

Answer 1

hope this help...........

Answer 2

Answer:

The price elasticity of demand is 0.5

Explanation:

In this question, we have to calculate the price elasticity of demand. To calculate the price elasticity of demand it is given that the price of a consumer good falls by 50%. When the price falls, the demand for this consumer good increases by 30 units.

To calculate the price elasticity of demand first, we have to calculate the percentage change in the demand for the goods. To calculate this we use a formula.

$Percentage Change in Demand=\frac{Change in Demand}{Original Demand} *100$

$Percentage Change in Demand=\frac{30}{120} *100$

                                                $=25 %$

Hence, the percentage of demand changed is 25%.

Now we calculate the price elasticity of demand. To calculate this we divide the percentage of change in demand by the Percentage of fall in price.

$Price Elasticity of Demand=\frac{Percentage Change in Demand}{Percentage Change in Price}$

$=\frac{25}{50} \\ =\frac{1}{2} \\ =0.5$

Hence, the price elasticity of demand is 0.5.

#SPJ2