Define price elasticity of demand. Give the percentage formula of price
elasticity of demand.
() As a result of 5% fall in the price of a good, its demand rises by 12%. Find the
price elasticity of demand
(iii) What type of goods is this? Give reasons.
(iv) Give two examples of such a goods.
Answers
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Hey Mate !
⇒Price elasticity of demand, or elasticity, is the degree to which the effective desire for something changes as its price changes. In general, people desire things less as those things become more expensive.
⇒The price elasticity of demand is calculated as the percentage change in quantity demanded (110 - 100 / 100 = 10%) divided by a percentage change in price ($2 - $1.50 / $2). The price elasticity of demand, in this case, is 0.4. Since the result is less than 1, it is inelastic.
⇒The elasticity of demand is 2.4 this comes after dividing the percentage in quantity with the percentage change in price. So, it is given in the question that the percentage change in quantity is 12% and the percentage change in price is 5%. Thus elasticity is 2.4
Hope It Helps U !