The price elasticity of demand for goods X and Y is known to be 1 and 2 respectively. Price of X rises by 5% while that of goods Y falls by 5 0/0. What are the percentage changes in the quantities of X and Y?
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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.
Explanation:
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