Question

commodities A and B have equal price elasticity of demand . The demand of X rises from 100 units to 150 units due to a 20 percent fall in its price . Calculate the percentage fall in demand of Y if its price rises by 8 percent.

Answer 1

Hope this help.........

Answer 2

Given:

Commodity A

Q₀ = 100 units

Q₁ = 150 units

% change in price = -20%

Find:

% change in Quantity for Commodity B

Computation of % change in Quantity:

% change in Quantity = [(Q₁-Q₀)/Q₀]100

% change in Quantity = [(150-100)/100]100

% change in Quantity = 50%

Computation of Elasticity of Commodities A:

Ed = % change in Quantity / % change in price

Ed = 50% / (-20%)

Ed = -2.5%

Given that Ed for A = Ed for B

Computation of % change in Quantity for Commodity B

-2.5% = % change in Quantity / -8%

% change in Quantity = 20%

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