Question

If the price hike in the market is about 10% and this leads to the fall in the quantity demanded by 12%, calculate the price elasticity of demand. Mention the degree of price elasticity of demand.

Answer 1

e_p = `(%  "change in quantity demanded")/(%  "change in price")`

= `12/10`

= 1.2

Here e_p > 1

Therefore, demand is (relatively) elastic.