Question

Find the elasticity of demand of X and Y on the basis of the demand schedule given below and specify which one is more elastic:

Good X		Good Y
Px(Re)	Dx(units)	Py(Re.)	Dy(units)
8	10	8	10
4	12	6	25

Answer 1

For Good X:

• Initial Price (P_x1) = 8
• New Price (P_x2) = 4
• Initial Quantity (Q_x1) = 10
• New Quantity (Q_x2) = 12

% Change in Quantity Demanded (X) = `((12 - 10)/10) xx 100`

= `(2/10) xx 100`

 = 20%

% Change in Price (X) = `((4 - 8)/8) xx 100`

= `((-4)/8) xx 100`

= −50%

E_d​(X) = `(20%)/(-50%) `

E_d​(X) = −0.4

For Good Y:

• Initial Price (P_y1) = 8
• New Price (P_y2) = 6
• Initial Quantity (Q_y1) = 10
• New Quantity (Q_y2) = 25

% Change in Quantity Demanded (Y) = `((25 - 10)/10) xx 100 `

= `(15/10) xx 100`

= 150%

% Change in Price (Y) = `((6 - 8)/8) xx 100`

= `((-2)/8) xx 100`

= −25%

E_d​(Y) = `(150%)/(-25%)`

E_d​(Y) = −6.0