The price elasticity of demand of good x is double the price elasticity of demand of good y .A ten percent rise in the price of good y results in fall in its demand by 60 units if original demand of good y was 400 calculate percemtage rise in quant demanded of good x when its price falls from rs 10 to rs8 per units.
Answers
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Keeping in view that; a ten percent rise in the price of good y results in fall in its demand by 60 units if original demand of good y was 400; the percentage quantity demanded of the good x when its price falls from rs 10 to Rs. 8 per units is 60 percent.
The answer is
60% rise in quantity demanded of good x.
Explanation:
Percentage change in quantity demanded for good Y:
= (Change in Quantity ÷ Initial Quantity) × 100
= (60 units ÷ 400 units) × 100
= 15%
Percentage change in price of good Y = 10% Rise
Therefore, the price elasticity of demand for Good Y is as follows:
= Percentage change in Quantity demanded ÷ Percentage change in price
= 15 ÷ 10
= 1.5
Hence,
Price elasticity of demand of good x:
= 2 × price elasticity of demand of good y
= 2 × 1.5
= 3
Percentage change in price of good x:
= (Change in price ÷ Initial price) × 100
= (2 ÷ 10) × 100
= 20%
Therefore,
Price elasticity of demand for Good x = Percentage change in Quantity demanded ÷ Percentage change in price
3 = Percentage change in Quantity demanded ÷ 20
3 × 20 = Percentage change in Quantity demanded
60% = Percentage change in Quantity demanded for good x
Hence, 60% rise in quantity demanded of good x.
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