Question

The price elasticity of demand for good X is known to be twice that of good. Y. Price of X falls by 5% while that
of Y rises by 5%. What is percentage change in quantities of X and Y, assuming that price elasticity of demand
for good Y is (-)1​

Answer 1

Answer:

If E

d

=1 for commodity - Y

E

d

=2 for commodity - X

∴5 per cent rise in price of Y should mean 5 per cent decrease in quantity of Y and 5 per cent fall in price of X should mean 10 per cent in quantity of X.

Quantity of X will increase by 10 per cent, and quantity of Y will decrease by 5 per cent.

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