Question

When price of a good is Rs. 5, the consumer buys 20 units of that good. When price changes to Rs. 7, the quantity purchased changes to 12 units. Calculate the price elasticity of demand.

Answer 1

Answer:

Given: Q−10,Q

1

=12,P=5,P

1

=4

ΔP=(4−5)=−1,ΔQ=(12−10)=2

E

d

=(−1)

Q

P

∗

ΔP

ΔQ

=(−)

10

5

∗

−1

2

=1

E

d

=1 Unitary elastic demand.