Question

calculate and comment on nature of price of elasticity of demand if with a rise in price of good X from rupees 40 and Rupees 15 the quantity demanded Falls by 40%​

Answer 1

Old price, P=15                        Fall in qty = 40%

New price, P1=40

Change in price = 25

Percentage change in price = P1-P/P

                                                = 40-15/15

                                                 = 25/15   =  1.6 %

Price Elasticity of Demand = %change in qty demanded/%change in price

                                              =  40/1.6

                                              = 25.

The demand is relatively elastic.