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What Will Be the Effect of 10 Percent Rise in Price of a Good on Its Demand If Price Elasticity of Demand is (A) Zero, (B)-1, (C)-2. - Economics

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What will be the effect of 10 percent rise in price of a good on its demand if price elasticity of demand is (a) Zero, (b)-1, (c)-2.

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Solution

(a) Given that

Ed = 0,Percentage change in price = 10

`E_d="Percentage change in quanitity demanded"/"Percentage change in price"`

`0="Percentage change in quanitity demanded"/10`

Therefore, Percentage change in quanitity demanded = 0

 

(b) Given that

Ed = -1, Percentage changeinprice=10

`E_d="Percentage change in quanitity demanded"/"Percentage change in price"`

`-1="Percentage change in quanitity demanded"/10`

Therefore,Percentagechangein quanitity demanded = -10

 

(C) Given that

Ed = -2, Percentage change in price = 10

`E_d="Percentage change in quanitity demanded"/"Percentage change in price"`

`-2="Percentage change in quanitity demanded"/10`

Therefore, Percentage change in quanitity demanded = -20

Concept: Elasticity of Demand
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