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Let slope of demand curve =-0.5. Calculate ED when initial prices is Rs. 20 per unit and initial quantity is 50 units of the commodity. |
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Answer» Solution :Demand curve slopes downward, indicating negative RELATIONSHIP between price of a COMMODITY and its quantity demanded. Slope of the demand curve is estimated as `Delta p//Delta q`. Slope of demand curve `=(Delta P)/(Delta Q)=(-)0.5` So, reciprocal of slope of demand curve `=(Delta Q)/(Delta P)=(-)(1)/(0.5)`. INITIAL price (P) = 20, Initial Quantity (Q) = 50 [given] We know, `ED = (Delta Q)/(Delta P)xx(P)/(Q)=-(1)/(0.5)xx(20)/(50)=(-)(4)/(5)=-0.8` Negative Sign of ED indicates that inverse relationship between price and quantity demanded. P.E.D = 0.8 [Less than Unitary elastic demand or inelastic demand] |
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