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CBSE Class 12-commerce Answered

If the price of a commodity rises by 10%  and its quantity demanded falls from 40 units to 30 units . calculate price elasticity and comment on nature of elasticity
Asked by seeni2005 | 27 Mar, 2019, 09:53: PM
answered-by-expert Expert Answer
Given:
Q= 40
Q1= 30
Change in price = 10%
p e r c e n t a g e space c h a n g e space i n space q u a n t i t y space equals space fraction numerator increment Q over denominator Q end fraction space cross times 100 space space space space space i e space 10 over 40 cross times 100 space equals bold space bold 25 bold percent sign p e r c e n t a g e space c h a n g e space i n space p r i c e space equals bold space bold 10 bold percent sign P r i c e space e l a s t i c i t y space o f space d e m a n d space left parenthesis E p right parenthesis equals space fraction numerator p e r c e n t a g e space c h a n g e space i n space q u a n t i t y over denominator p e r c e n t a g e space c h a n g e space i n space p r i c e end fraction space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space equals left parenthesis negative right parenthesis space fraction numerator 25 space percent sign over denominator 10 space percent sign end fraction space equals space bold 0 bold. bold 4
Therefore price elasticity of demand is Ep<1 ie Inelastic. 
 
 
Answered by Christina | 01 Apr, 2019, 10:20: AM
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