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The price elasticity of demand for a good is `0.4`. If its price increase by 5 per cent, by what percentage will its demand fall ? Calculate. |
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Answer» `E_(p) = ("Percentage change in quantity demanded")/("Percentage change in price")` `-0.4 = ("Percentage change in quantity demanded")/(5)` `-2 =` Percentage change in quantity demanded `:.` Quantity decreases by 2% or Demand falls by 2% |
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