Price of a product falls from Rs.10 to Rs.9 per unit. As a result, its – InterviewSolution

1.

Price of a product falls from Rs.10 to Rs.9 per unit. As a result, its demand rises from 9 units to 10 units. Calculate price elasticity of demand using expenditure approach.

Answer»

Given P = 10, P₁ = 9, Q = 9, Q₁ = 10

Total Expenditure

P	Q	Total Expenditure (P xQ)
10	9	90
9	10	90

Since total expenditure is constant, elasticity of demand is one.

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