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Question
The price of a commodity goes up from ₹ 5 to ₹ 6 as a result of which, demand falls from 10 units to 8 units. Calculate the price elasticity of demand.
Numerical
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Solution
Initial Price (P) = ₹ 5
New Price (P1) = ₹ 6
Change in Price (ΔP) = 6 − 1 = 1
Initial Quantity Demanded (Q) = 10 units
New Quantity Demanded (Q1) = 8 units
Change in Quantity Demanded (ΔQ) = 10 − 8 = 2 units
Ed = `(ΔQ)/(ΔP) xx P/Q`
= `2/1 xx 5/10`
= `2 xx 5/10`
= `10/10`
= 1
The price elasticity of demand is 1.
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