Question

Negative Sign of ED indicates the inverse relationship between price and quantity demanded. PED = 0.3 [Less than unitary elastic demand or Inelastic demand]
When price of a good is Rs. 7 per unit, a consumer buys 12 units. When price falls to Rs. 6 per unit he spends Rs. 72 on the good. Calculate price elasticity of demand by using the percentage method. Comment on the likely shape of demand curve based on this measure of elasticity. ​

Answer 1

Answer:

if ped is - 0.3 answer is 11.48--> here demand curve will be slopes downwards

and if Ped is +0.3 answer will be 12.514--> here demand curve will be slopes upwards

Explanation:

+0.3 = q-12/7-6*7/12

+0.3 = (q-12)*7/12

+0.3*12=(q-12)*7

3.6 = (q-12)*7

3.6/7 = q-12

0.514 = q-12

12+0.514 = q

q = 12.514 here demand curve will be slopes upwards

and if PED is -0.3(minus sign)

-0.3 = (q-12)*7/12

-0.3*12 = (q-12)*7

-3.6/7 = (q-12)

-0.514 = q-12

12-0.514 = q

i.e q = 11.486 in this case demand curve will be downwards