Question

When the price of the ice-cream is Rs 20 per
unit, the demand will be 150 units. Suppose
the price of the ice-cream rises to Rs 25
per unit, as a result the demand falls to
100 units. Calculate the price elasticity of
demand?
1
1.25
2
0
3 1
4
1.33​

Answer 1

Answer:

The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price. Therefore, the elasticity of demand between these two points is 6.9%−15.4% which is 0.45, an amount smaller than one, showing that the demand is inelastic in this interval.