Question

The price elasticity of demand of commodity y is half the price elasticity of demand of commodity x. 10% rise in the price of X results in 20% fall in its demand. If the price of y falls by 5% calculate the percentage rise in its demand.

Answer 1

If Ed = 1 for commodity - Y

Ed = 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.