Answer:
Given: Initial Total Expenditure (\[T{{E}_{o}}\]) = Rs. 1000 Final Total Expenditure (\[T{{E}_{1}}\]) = Rs. 800 Initial Price (\[{{P}_{0}}\]) = Rs. 10 Percentage change in price \[=20\] Percentage change in price \[=\frac{{{P}_{1}}-{{P}_{o}}}{{{P}_{o}}}\times 100\] \[-\,20=\frac{{{P}_{1}}-10}{10}\times 100\] \[\frac{-200}{100}={{P}_{1}}-10\] \[{{P}_{1}}=8\] Price (P) Total Expenditure (TE) = Price (P)x Quantity (Q) \[=\frac{TE}{P}\] \[{{P}_{o}}=Rs\,\,10\] \[T{{E}_{o}}=\,\,Rs\,\,1000\] \[{{Q}_{o}}=100\] \[{{P}_{1}}=\,\,Rs\,\,8\] \[T{{E}_{1}}=\,\,Rs\,\,800\] \[{{Q}_{1}}=100\] Now, \[{{E}_{d}}=(-)\frac{\text{Percentage}\,\,\text{change}\,\,\text{in}\,\,\text{quantity}\,\,\text{demanded}}{\text{Percentage}\,\,\text{change}\,\,\text{in}\,\,\text{price}}\] \[{{E}_{d}}=(-)\frac{\frac{{{Q}_{1}}-{{Q}_{0}}}{{{Q}_{0}}}\times 100}{-20}\] \[{{E}_{d}}=(-)\frac{\frac{100-100}{100}\times 100}{-20}\] \[{{E}_{d}}=0\] Thus, the price elasticity of demand is 0.
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