when the price of a commodity increase by 10% it's quantity demanded decreases by 40% then what will be the value of price elasticity of demand of price good?
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Answer:
Given, percentage change in price =(−)10%
Q=150 units;Q
1
=180 units;△Q=Q
1
−Q=(180−150)units=30 units
Percentage change in quantity demanded =
Q
△Q
×100
=
150
30
×100=20%
Price elasticity of demand (E
d
)=(−)
Percentage change in price
Percentage change in quantity demanded
=(−)
−10%
20%
=2
When demand rises from 150 to 210 units:
E
d
=2
Q=150 units;Q
1
=210 units;△Q=Q
1
−Q=(210−150)units=60 units
Percentage change in quantity demanded =
Q
△Q
×100
=
150
60
×100=40%
Price elasticity of demand (E
d
)=(−)
Percentage change in price
Percentage change in quantity demanded
2=(−)
Percentage change in price
40%
Percentage change in price =
2
−40%
=20%
Price elasticity of demand =2.
Percentage fall in price =20%.
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