Question

If the price a product increases from R200 to R250 then demand falls from R450 to 300 units.Calculate Price elasticity of demand and determine the degree of elasticity

Answer 1

Answer:

Explanation:

Given:

If the price of a product increases from R200 to R250 then demand falls from R450 to 300 units. Calculate Ped & determine the degree of elasticity?

To find:

Calculate Ped & determine the degree of elasticity?

Solution:

We know,

Finding the percentage change in price:

We have,

Original price, P₀ = 200

New price, P₁ = 250

∴ % change in the price =  

Finding the percentage change in quantity demanded:

We have,

Original quantity, Q₀ = 450 units

New quantity, Q₁ = 300 units

∴ % change in the quantity demanded,

=  

Finding the PED:

On substituting the calculated values in the formula of PED above, we get

Finding the degree of elasticity:

We got the price elasticity of demand i.e., PED = (-) 1.33

⇒ The degree of elasticity is said to be → .