Question

Answer the following question.
If the price of a commodity rises by 40% and its quantity demanded falls from150 units to 120 units, calculate the coefficient of price elasticity of demand for the commodity.

Answer 1

Given :
Q₁ = 150
Q₂ = 120
Price rises by 40%

`"Elasticity of demand" = "Percentage change in Quantity Demanded"/"Percentage change in Price"`

`"Percentage change in Quantity demand" = ("Q"_2-"Q"_1)/"Q"_1 xx 100`

= `(150-120)/(150) xx 100 = 20%`

`"Elasticity of demand" = "Percentage change in Quantity Demanded"/"Percentage change in Price"`

= `(20)/(40) = 0.5`