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The price elasticities of demand for goods X and Y are known to be 1 and 2 respectively. Price of X rises by 5% while that of goods Y falls by 5%. What are the percentage changes in the quantities demanded of X and Y ? |
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Answer» SOLUTION :Price Elasticity of DEMAND (ED) of X `=("% Change in quantity demanded")/("% Change in price")` `1=("% Change in quantity demanded")/(5%)` `2=("% Change in quantity demanded")/((-)5%)` Percentage change (RISE) in the quantity of Y = 10% Quantity of X will fall by 5%, Quantity of Y will rise by 10%. |
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