When the price of good fall from Rs.10 to Rs. 8 per unit its demand rises from 20 units to 24 units what
can you say about price elasticity of demand of the good through percentage method.
Answers
Answer:
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Explanation:
Elasticity of demand by percentage method:-
Original price(P)= 10 units
New price(P¹)= 8 units
Change in price(Δ)=P¹–P
= 8–10
ΔP = –2 units
Original quantity demanded(Q)= 20 units
New quantity demanded(Q¹)= 24 units
Change in quantity demanded=Q¹ – Q
= 24–20
ΔQ =4 units
percentage change in quantity demanded
=ΔQ x 100
Q
= 4 x 100
20
=20%
percentage change in price
= ΔP x 100
P
= –2 x 100
10
= –20%
Elasticity of demand by percentage method
Price elasticity of demand
= Percentage change in quantity demanded
Percentage change in price
= 20%
–20%
= –1
Statement about price elasticity of demand:-
The demand of good is Less elastic demand
If a curve is less elastic, then it will take large changes in price to effect a change in quantity consumed.