Consider the demand for a good . At price ₹ 4 , the demand for the good is 25 units . Suppose price of the good increases to ₹5 andas a result, the demand for the good falls to 20 units. Calculate the price elasticty.

Consider the demand for a good . At price ₹ 4 , the demand for the g

1.	Consider the demand for a good . At price ₹ 4 , the demand for the good is 25 units . Suppose price of the good increases to ₹5 andas a result, the demand for the good falls to 20 units. Calculate the price elasticty.
Answer» Solution :Given: Original QUANTITY (Q) =25 units, Fall in Qunatity `(DeltaQ) =-5` units, New Qunatity `(Q_(1)` =20 units, Original price (P)= ₹4, Rise in price `(DeltaP)`= ₹ 1, New price `(P_(1)) = ₹5` price . Elasticity of Demand `(E_(d))= (DeltaQ)/(DeltaP)xxP/Q=(-5)/1 XX 4/25 = (-) 0.8 ` Demand is less elastic as `E_(d) lt 1`. Negative SIGN indicates the inverse relationship between price and the quantity DEMANDED.