Question

The demand for good rises by 20 percent as a result of all in its price. Its price elasticity of demand is (−) 0.8. Calculate the percentage fall in price.

Answer 1

`E_d="Percentage Change in Quantity Demanded"/"Percentage Change inPrice"`

or, 0.8 = `20/"Percentage Change in Price"`

or, Percentage Change in Price =`20/0.8` = 25%

Thus, the percentage fall in the price 25.