Calculate the price elasticity of demand by the percentage method ,when total expenditure on a commodity falls from Rs900 to 600 due to rise in price Rs 5 to 6
Dear Student
Ed = (-) (P0 / Q0) x (change in Q / Change in P)
= (-) (5/180) x [(-80) / 1]
= (-) [-2.22]
= 2.22
Elasticity of demand is more than 1
change in Q = Q 1 - Q0 = 100 -180 = - 80
change in P = P1 - P0 = 6-5 = 1
Regards
Price (P) | Total Expenditure (TE)=Price(P)×Quantity(Q)Total Expenditure TE=PriceP×QuantityQ | Quantity(Q)=TE/P |
P 0 = Rs 5 | TE 0 = Rs 900 | Q 0 = 180 |
P 1 = Rs 6 | TE 1 = Rs 600 | Q 1 = 100 |
= (-) (5/180) x [(-80) / 1]
= (-) [-2.22]
= 2.22
Elasticity of demand is more than 1
change in Q = Q 1 - Q0 = 100 -180 = - 80
change in P = P1 - P0 = 6-5 = 1
Regards