Answer:
Given Initial Total Expenditure\[T{{E}_{0}}\] = Rs. 400 Final Total Expenditure\[T{{E}_{1}}\] = Rs. 500 Initial Price \[{{P}_{0}}\] = Rs. 8 Percentage change in price = + 25 Percentage change in price = \[\frac{{{P}_{1}}-{{P}_{0}}}{{{P}_{0}}}\,\,\times \,\,100\] \[25=\frac{{{P}_{1}}-8}{8}\,\,\times \,\,100\] \[\frac{200}{100}={{P}_{1}}-8\] \[{{P}_{1}}=10\] Price (P) Total Expenditure Te = Price P \[\times \] Quantity Q Quantity Q = TEP \[{{P}_{o}}=Rs\,\,8\] \[T{{E}_{0}}=\,\,Rs\,\,400\] \[{{Q}_{0}}=50\] \[{{P}_{1}}=\,\,Rs\,\,10\] \[T{{E}_{1}}=\,\,Rs\,\,500\] \[{{Q}_{1}}=50\] Now \[\text{Ed = }\frac{\text{Percentage}\,\,\text{change}\,\,\text{in}\,\,\text{quantity}\,\,\text{demanded}}{\text{Percentage}\,\,\text{change}\,\,\text{in}\,\,\text{price}}\] Percentage change in Quantity = \[\frac{{{Q}_{1}}-{{Q}_{0}}}{{{Q}_{0}}}\,\times \,\,100\] \[=\frac{50-50}{50}\,\,\times \,\,100\] \[\text{Ed = }\frac{\text{Percentage}\,\,\text{change}\,\,\text{in}\,\,\text{quantity}\,\,\text{demanded}}{\text{Percentage}\,\,\text{change}\,\,\text{in}\,\,\text{price}}\] \[=\frac{0}{25}\] Ed = 0 Thus, the price elasticity of demand is 0.
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