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 
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
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 = P- P  = 6-5 = 1


Regards
 

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