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A 5 per cent fall in the price of a good raises its demand from 300 units to 318 units. Calculate its price elasticity of demand. |
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Answer» SOLUTION :Given, the initial quantity `Q_(1) = 300` New quantity `Q_(2) = 318` So, `DQ = 318 - 300 = 18` Now, percentage fall in price `= (Delta P)/(P)xx 100 = (-) 5%` We KNOW, `E_(d) = (-) ((Delta Q)/(Delta_(1)) xx 100)/((Delta P)/(P) xx 100) = (-) ((18)/(300) xx 100)/((-)5) = (-) (6)/((-) 5) = 1.2` Thus, price elasticity of demand is 1.2 |
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