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Calculate theP.e_(D) for a commodity when its price increases by 25% and quantity demanded falls from 150 units to 120 units. |
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Answer» Solution :`{:("Original QUANTITY (Q) = 150 units","% Change in Price "=25%),("New Quantity "(Q_(1))=120" units","Elasticity of Demand (ED) = ?"),("Change in Quantity "(DELTA Q)=-30" units",):}` Percentage change in demand `=(Delta Q)/(Q)xx100=(-30)/(150)xx100=-20%` Price Elasticity of Demand `(ED)=("% Change in quantity demanded")/("% Change in price")=(-20%)/(25%)` Price Elasticity of Demand (ED)`=(-)0.8` ED `=(-)0.8`, Demand is less ELASTIC because `ED lt 1`. |
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