question_answer

Price Elasticity of Demand\[({{E}_{d}})\]of a commodity is 2. If the quantity demanded increases by 1%, what is the percentage change in price?

Answer:

Here, Price Elasticity of Demand\[({{E}_{d}})=2\] Percentage change in quantity demanded =1% Percentage change in price =?                                                                    \[{{E}_{d}}=\frac{Percentage\,Change\,in\,Quantity\,Demanded}{Percentage\,Change\,in\,\Pr ice}\] \[2=\frac{1}{Percentage\,Change\,in\,\Pr ice}\]              \[\Rightarrow \]Percentage change in price\[=\frac{1}{2}\] or 0.5%