Consider the demand for a good. At price Rs 4, the demand for the good

1.	Consider the demand for a good. At price Rs 4, the demand for the good is 25 units. Suppose price of the good increases to Rs 5, and as a result, the demand for the good falls to 20 units. Calculate the price elasticity.
Answer» P1 = 4, Q₁ = 25 P2 = 5, Q₂ = 20 ΔP = P₂ - P₁ = 5 - 4 = 1 ΔQ = Q₂- Q₁ = 20 - 25 = -5 e_d = ΔQ/ΔP X P/Q = - 5/1 x 4/25 = - 4/5 e_d = - 0.8

Consider the demand for a good. At price Rs 4, the demand for the good is 25 units. Suppose price of the good increases to Rs 5, and as a result, the demand for the good falls to 20 units. Calculate the price elasticity.

Answer»

P1 = 4, Q₁ = 25

P2 = 5, Q₂ = 20

ΔP = P₂ - P₁ = 5 - 4 = 1

ΔQ = Q₂- Q₁ = 20 - 25 = -5

e_d = ΔQ/ΔP X P/Q

= - 5/1 x 4/25

= - 4/5

e_d = - 0.8

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Consider the demand for a good. At price Rs 4, the demand for the good is 25 units. Suppose price of the good increases to Rs 5, and as a result, the demand for the good falls to 20 units. Calculate the price elasticity.

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