Question

Irrespective of price, Sofia
always spends Rs. 100 a week on ice cream, we conclude that
Select one:
O a. Elasticity of demand is 0
b. Elasticity of demand is!
Oc. The law of demand has been violated
O d. Elasticity of demand is infinite​

Answer 1

Given : Irrespective of price, Sofia  always spends Rs. 100 a week on ice cream,

To Find : Elasticity of demand

Solution:

Spend = Demand x  Price

Spend = 100

=> Demand = 100/Price

Let say Price of Icecream = A

Demand = 100/A  

New Price of Icecream = B

Demand = 100/B

% change in Price=  (B - A) /((B + A)/2)   * 100  

= 200(B - A)/(B + A)

% change in Demand =  (100/A - 100/B) /( 100/A + 100/B)/2   * 100

=> 200( B - A) / (B + A)

elasticity of demand  = % Change in Demand / %Change in Price  

= {200( B - A) / (B + A)/{200(B - A)/(B + A)}

= 1

elasticity of demand   is  1

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