Question

The price of a commodity increase from ₹ 10 to ₹ 14. Calculate percentage fall in quantity demanded of the commodity if the coefficient of price elasticity of demand is (−) 1.25.

Answer 1

Given: 
P₁ = 10
P₂ = 14
Price Elasticity of Demand = 1.25
Percentage fall in quantity demanded = ?

Percentage rise in price = `("P"_2-"P"_1)/("P"_1) xx 100 = (14-10)/(10) xx 100 = 40%`

The elasticity of Demand = `" Percentage fall in quantity demanded"/"Percentage in price"`

(-) 1.25 = `"Percentage fall in Quantity Demanded"/(40%)`

Percentage Change in Quantity Demanded = 1.25 x 40% = 50%