Consider the demand for a good. At a price ₹4 the demand for the goo

1.	Consider the demand for a good. At a price ₹4 the demand for the good is 30 kg. Suppose price of the good increases to ₹5 and as a result the demand for the good falls to 20 kg. Calculate the price elasticity of demand.
Answer» Elasticity of demand Ep = \(\frac{ΔQ}{ΔP}\times\frac{P}{Q}\) In this example, ΔQ = 10, ΔP = 1, P = 4, Q = 30 Therefore, Ep = \(\frac{10}{1}\times\frac{4}{30}\) = 0.75

Consider the demand for a good. At a price ₹4 the demand for the good is 30 kg. Suppose price of the good increases to ₹5 and as a result the demand for the good falls to 20 kg. Calculate the price elasticity of demand.

Answer»

Elasticity of demand

Ep = \(\frac{ΔQ}{ΔP}\times\frac{P}{Q}\)

In this example,

ΔQ = 10, ΔP = 1, P = 4, Q = 30

Therefore, Ep = \(\frac{10}{1}\times\frac{4}{30}\) = 0.75