A consumer spends Rs 40 on a commodity when its price was Rs 1 per unit and spends Rs 48 - Economics - Theory of Consumer Behaviour

Question

A consumer spends Rs 40 on a commodity when its price was Rs 1 per
unit and spends Rs 48 when its price was Rs 2 per unit Calculate
its price elasticity of demand by the percentage method

Vanita Rana · Accepted Answer

Dear Student,

Given:
Initial Total Expenditure TE0=Rs 40Final Total Expenditure TE1=Rs 48Initial Price P0=Rs 1Final Price P1=Rs 2

Price (P)

Total Expenditure TE=PriceP×QuantityQ
QuantityQ=TEP

P0 = Rs 1
TE0 = Rs
40
Q0 = 40

P1 =
Rs 2
TE1 = Rs
48
Q1 = 24

Now,

Ed=-P0Q0×∆Q∆PEd=-140×24-402-1Ed=-140×-161Ed=--0
4∴ Ed=0 4

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Price (P)	$Total Expenditure (T E) = Price (P) \times Quantity (Q)$	$Q u a n t i t y (Q) = \frac{T E}{P}$
P₀ = Rs 1	TE₀ = Rs 40	Q₀ = 40
P₁₌Rs 2	TE₁= Rs 48	Q₁= 24

A consumer spends Rs.40 on a commodity when its price was Rs.1 per unit and spends Rs.48 when its price was Rs. 2 per unit. Calculate its price elasticity of demand by the percentage method.