when price of a good gets halved it's demand rises from 120 units. calculate it's price elasticity of demand? with explanation pls
Answers
Answer:
Explanation:
The price elasticity of demand basically refers to the responsiveness of the quantity demand of a certain good or service in respect to the change in price of that good or service.
The basic way of changing the price elasticity of demand is to follow these steps,
Step 1:
Calculate the change in Quantity Demanded,
How?
(New Quantity Demanded - Old Quantity Demanded)/Old Quantity Demanded X 100
Demand risen by 120 units.
Old demand: 100
New demand: 220
Calculation: 220-100/ 100 X100
Answer: 120%
Step 2:
Calculate the change in Price,
How?
(New Price - Old Price)/ Old Price X 100
Example: Price was 100 at first. Then it got halved, i.e. 50.
So old price 100
New price 50
Your calculation will be, 50-100 /100 X 100
answer: -50%
Step 3:
Calculate the PED ( Price elasticity of Demand)
How?
Formula: % change in QD/ %change in Price
%120/%-50
the PED = -2.4