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When price of a commodity falls by 20%, the quantity demanded of it increases by 80%. Find out its price elasticity of demand. |
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Answer» Solution :`{:("% Change in DEMAND = 80%% Change in Price "=-20%),("Elasticity of Demand (ED) = ?"):}` Price Elasticity of Demand (ED) `=("% Change in quantity DEMANDED")/("% Change in Price")` `=(80%)/(-20%)=-4` `ED=(-)4` (Demand is HIGHLY ELASTIC as `ED gt1`). |
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