Question

Price of a good falls from Rs . 100 to Rs 80. As a result its demand rises from 4000 units to 5000 units Calculate Price Electricity of Demand​

Answer 1

Explanation:

Answer

Given, P=Rs.20; P

1

=Rs.23;

△P=P

1

−P=Rs.23−Rs.20=Rs.3

Percentage change in price =

P

△P

×100=

20

3

×=15 per cent

Percentage change in quantity demanded =(−)30 per cent

Price elasticity of demand (E

d

)=(−)

Percentagechangeinprice

Percentagechangein quantitydemanded

=(−)

15%

−30%

= 2

Price elasticty of demand =2.

Answer 2

Concept:

As the price of any good falls, the demand increases. Price and demand are inversely proportional.

Given:

P= Rs.100                          

P1= Rs.80

Q= 4000

Q1= 5000

Find:

We have to find the price elasticity of demand.

Solution:

^P= 80-100= -20

^Q= 5000-4000= 1000

Ed= ^Q/ ^P x P/Q

Ed= 1000/-20 x 100/4000

Ed= 1.25

The price elasticity of demand is 1.25

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