1.

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.

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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