Question

When the price of a commodity X falls by 10 percent. Its demand rises from 150 units to 180
units. Calculate is price elasticity of demand. How much should be the percentage fall in its
price so that its demand rises from 150 to 210 units?

Answer 1

Given that

Percentage fall in price = 10

Initial demand = 150

New demand = 180

% Increase in demand = `30/150 xx 100 = 20%`

Aswe know that

`e_d = "-% Change in demand"/"% Change in price" = -20/10 = -2`

if demand increase from 150 to 210

% Change in demand = `60/150 xx 100 = 40%`

% Change in price = `"% Change in demand"/e_d = 40/2 = -20`

Hence, the price will fall by 20% if the demand will increase from 150 to 210.