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Question
80 per cent fall in the price of a commodity leads to 100% increase in its demand. Calculate the price elasticity of demand.
Numerical
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Solution
% Change in Quantity Demanded = 100%
% Change in Price = 80%
Ed = `("% Change in Quantity Demanded")/("% Change in Price")`
= `(100%)/(80%)`
= `10/8`
= 1.25
The price elasticity of demand is 1.25.
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