#### Question

A 5 percent fall in the price of a good raises its demand from 300 units to 318 units. Calculate its price elasticity of demand.

#### Solution

Given, the initial quantity Q_{1} = 300

New quantity Q_{2} = 318

So, ΔQ = 310 - 300 = 18

Now, percentage fall in price =`(ΔP)/Pxx100` = (-)5%

We know,

`E_d=(-)((ΔQ)/Qxx100)/((ΔP)/Pxx100)=(-)(18/300xx100)/((-)5)=(-) 6/((-)5)=1.2`

Thus, price elasticity of demand is 1.2

Is there an error in this question or solution?

Solution A 5 Percent Fall in the Price of a Good Raises Its Demand from 300 Units to 318 Units. Calculate Its Price Elasticity of Demand. Concept: Factors Affecting Price Elasticity of Demand.