Question

When the price of fan
increased from Rs.600 to
Rs.650, the demand for fan
decreased from 200 units to
188 units
. What is the price
elasticity of demand for
Fans?​

Answer 1

Answer:

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Answer 2

Given,

Initial price = Rs. 600

Final price = Rs. 650

Initial quantity demanded = 200

Final quantity demanded = 188

To determine,

The elasticity of demand

Solution,

For fans, the price elasticity of demand is 0.72.

We can easily answer the numerical problem of elasticity by doing the following.

We are aware of this.

The price elasticity = (-) $\frac{P}{Q}*\frac{/Q}{/P}$

where,

P = Initial price = Rs. 600

Q = Initial quantity demanded = 200 units

/P = Change in price = Rs. 50

/Q = Change in quantity demanded = -12 units

Thus,

The price elasticity of demand = (-) $\frac{600}{200}*\frac{-12}{50}$

                                                   = (+) 0.72

As a result, fans have a price elasticity of demand of 0.72.

Note;

The negative sign in the formula indicates that there is an inverse connection between the commodity's price and the amount desired. Larger is the price, less is the amount requested, and less the price more is the demanded quantity, all else being equal; ceteris paribus.