when price of a commodity reduces from Rs 5 per unit to Rs 4 per unit , expenditure on the commodity reduces from Rs 60 to Rs 40 . find price elasticity of demand .

Given:
Initial Expenditure (E0) = Rs 60
Initial Price (P0) = Rs 5
Final Expenditure (E1) = Rs 40
Final Price (P1) = Rs 4
Elasticity of demand = ?

E0 =P0×Q0i.e. 60 = 5×Q0so, Q0=12E1 =P1×Q1i.e. 40 = 4×Q1so, Q1=10Change in quantity demanded ΔQ=Q1-Q0=-2Change in price ΔP=P1-P0=-1Price elasticity of demand =ΔQΔP×PQ=-2-1×512=0.83

Note- I think there is something wrong with the question, since elasticity of demand is coming out to be positive. Please cross-check. If everything is fine, then this is the case of Giffen good, since as price falls, quantity demanded also falls.

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