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InterviewSolution
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As a result of increase in price from 4 to 5, the quantity demanded decreases by 20%. Comment on PED. |
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Answer» Solution :`{:("Original Price (P) = 4","Percentage CHANGE in quantity demanded "=(-)20%),("New Price "(P_(1))=5,ED=?),(DELTA P=1,):}` Percentage change in price`=(Delta P)/(P)xx100=(1)/(4)xx100=25%` `PED=("Percentage change in Quantity demanded")/("Percentage change in Price ")` `=([-]20%)/(25%)=[-]0.8` NEGATIVE SIGN of ED indicates that inverse relationship between price and quantity demanded. PED = 0.8[Less than unitary elastic demand or inelastic demand]. |
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