Answer:
Given: Initial Total Expenditure\[T{{E}_{0}}\] = Rs. 100 Final Total Expenditure \[T{{E}_{1}}\] = Rs. 75 Initial Price PO = Rs. 4 Percentage change in price = \[-25\] Percentage change in price = \[\frac{{{P}_{1}}-{{P}_{0}}}{{{P}_{0}}}=100\] \[25=\frac{{{P}_{1}}-4}{4}\,\,\times \,\,100\] \[100\,\,=\,\,{{P}_{1}}-\,\,4\,\,\times \,\,100\] \[\frac{100}{100}={{P}_{1}}-4\] \[{{P}_{1}}=4-1=3\] Price (P) Total Expenditure TE = Price P \[\times \] Quantity Q Quantity Q = TEP \[{{P}_{0}}=Rs\,\,4\] \[T{{E}_{0}}=\,\,Rs\,\,100\] \[{{Q}_{0}}=\,\,25\] \[{{P}_{1}}=\,\,Rs\,\,3\] \[T{{E}_{1}}=\,\,Rs\,\,75\] \[{{Q}_{ & 1}}=\,\,25\] Now, Ed = Percentage change in quantity demanded \[\div \] Percentage change in price Percentage change in \[Q=\frac{{{Q}_{1}}-{{Q}_{0}}}{{{Q}_{0}}}\,\,\times \,\,100\] \[=\frac{25-25}{25}\,\,\times \,\,100=0\] \[Ed\,\,=\,\,\frac{0}{1}=0\] Thus, the price elasticity of demand is 0.
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