Question

When the price of a commodity falls from ₹ 5 to 3 per unit, its demand rises by 40 per cent. Calculate its price elasticity of demand.

Answer 1

Initial Price (P) = ₹ 5

New Price (P1) = ₹ 3

Change in Price (ΔP) = 5 − 3 = 2

% Change in Demand = 40%

% Change in Price = `(ΔP)/P xx 100`

= `2/5 xx 100`

= 40%

Ed = `("% Change in Quantity Demand")/("% Change in Price")`

= `(40%)/(40%)`

= 1