Answer:
Original Price (P) = Rs. 10 per unit New price (P1) = Rs. 12 per unit Change in Quantity demanded (\[\Delta Q\]) = 20% Price elasticity of demand (Ed) =? Change in prices (\[\Delta P\]) =New price - Original price \[=12-10=Rs.\text{ }2\] Percentage change in price = \[\frac{\text{Change}\,\,\text{in}\,\,\text{price}}{\text{Original}\,\,\text{price}}\,\times \,\text{100}\] \[=\,\,\frac{\Delta P}{P}\times 100\] \[=\,\,\frac{2}{10}\times 100\] = 20% Price elasticity of demand = \[\frac{\text{Percentage}\,\,\text{change}\,\,\text{in}\,\,\text{quantity}\,\,\text{demanded}}{\text{Percentage}\,\,\text{change}\,\,\text{in}\,\,\text{price}}\] \[ED=\frac{20}{20}\] ED = 1 Now, further takes this elasticity of demand in another situation when price changes from Rs. 10 to Rs. 13 per unit Percentage change in price = \[\frac{\text{Change}\,\,\text{in}\,\,\text{price}}{\text{Original}\,\,\text{change}\,\,\text{in}\,\,\text{price}}\times \,\text{100}\] =\[\frac{13-10}{10}\times 100\] =\[\frac{3}{10}\times 100\,\,=\,\,30%\] Price elasticity of demand \[\text{=}\frac{\text{Percentage}\,\,\text{change}\,\,\text{in}\,\,\text{quantity}\,\,\text{demanded}}{\text{Percentage}\,\,\text{change}\,\text{in}\,\,\text{price}\,}\] \[\text{1 = }\frac{\text{Percentage}\,\,\text{change}\,\,\text{in}\,\,\text{quantity}\,\,\text{demanded}}{\text{30}}\] Percentage change in quantity demanded \[\text{=30}\times \text{1}\] = 30%
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