On the basis of information given below compare the price elasticities – InterviewSolution

1.

On the basis of information given below compare the price elasticities of good A and B.(a) Good APrice Total expenditure (Rs) 420530(b) Good BPriceTotal expenditure(Rs) 315424

Answer»

(a)

Price	T.E	QD
4	20	5
5	30	6

E_P = ∆Q/∆P X P/ Q

= 1/1 x 4/5 = 0.8

(b)

price	T.E	QD
3	15	5
4	24	6

E_P = ∆Q/∆P X P/Q

= 1/ 1 x 3/5 = 0.6

Demand for good A is more elastic than that of good B.

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