Question

when a price is rs10 per unit, demand for commodity is 100 units. as the price falls to rs8 per unit demand for commodity is 150 units. calculate the elasticity of demand.​

Answer 1

Change in Price = 8 - 10 = -2

Change in quantity demanded = 150-100 = 50

So the formula is ,

elasticity = (change in Qd/change in P) × (initial price / initial quantity)

=>(50/-2)×(10/100)

=> -25/10

=> -2.5

Therefore ,

Magnitude of price elasticity of demand (|e|)

= 2.5 Ans