Question

When price of sugar is ₹5 per kg,it's demand is 50 kg. When price rises by ₹5 per kg it's demand falls by 10 kg. Calculate the elasticity of demand

Answer 1

Answer:0.2

Explanation:

initial price P1= Rs. 5 per kg

initial demand Q1 =50kg

change in price ∆P= Rs.10 per kg

change in demand ∆Q= 10kg

price elasticity of demand =

(∆Q/Q) * (P/∆P)

=(10/5) * (5/50)

=1/5 = 0.2 < 1 ( relatively inelastic)