When the price of Rice reduced from Rs 10/- to Rs 8/- per kg, the demand for rice Increased from 4kg to 6kg. Calculate the elasticity of demand and explain that Elasticity please give answer with working
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p1=10
p2=8
%change in price= 8-10/10 *100
=-20%
qd1=4
qd2=6
%change in qd= 6-4/ 4 *100
=50%
Price elasticity of demand= %change in qd/%change in price
=- 50/20
=-2.5
Price elasticity of demand shows the responsiveness of quantity demanded with change in price. In the following example, demand for rice is elastic since 20% reduction in price causes demand to be increased by 50%. Also, since price elasticity of demand is negative, it shows a negative relationship between price and quantity demanded.
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