Question

A consumer purchased 10 units of a commodity when its price was ₹ 5 per unit. He purchased 15 units of the commodity when its price fell to ₹ 3 per unit. What is the price elasticity of demand for the commodity?

Answer 1

Initial Price (P) = ₹ 5

New Price (P₁) = ₹ 3

Initial Quantity (Q) = 10 units

New Quantity (Q₁) = 15 units

Change in Price (ΔP) = 5 − 3 = 2

Change in Quantity (ΔQ) = 15 − 10 = 5

Ed = `(ΔQ)/(ΔP) xx P/Q`

= `5/2 xx 5/10`

= 2.5 × 0.5

= 1.25

The price elasticity of demand for the commodity is 1.25.