Suppose the price of X rises from Rs.
3 per kg. to Rs. 5 per kg. and the
quantity demanded decreases from
30 kgs. to 10 kgs. Then price elasticity
of demand will be
O
O 2
O 1
Answers
Answer:
E
d
=(−)
Q
P
×
△P
△Q
Here, P=Rs.5;P
1
=Rs.4∴△P=P
1
−P=Rs.4−Rs.5=(−)Rs.1
Q=4 kg;Q
1
=6 kg∴△Q=Q
1
−Q=(6−4)kg=2 kg
Price elasticity of demand (E
d
)=(−)
4
5
×
−1
2
=
4
10
=2.5 (greater than unity)
Elasticity of demand is greater than unity.
Explanation:
From the following table, calculate price elasticity of demand by the percentage-change method.
Price of X (Rs. per unit) Total Expenditure (Rs.)
4
5 600
525
Medium
Answer
Price of X (Rs. per unit) Total Expenditure (Rs.) Demand (Units)
4
5 600
525
4
600
=150
5
525
=105
Here, P=Rs.4; P
1
=Rs.5;
△P=P
1
−P= Rs.5−Rs.4= Rs.1
Q=150 units; Q
1
=105 units; $$
△Q=Q
1
−Q= (105−150) units =(−)45 units
Price elasticity of demand(E
d
)=(−)
Q
P