consumer spend Rupees 1500 on a good price at rupees 10 per unit when price rises by 20% the - Economics - Introduction

Question

consumer spend Rupees 1500 on a good price at rupees 10 per unit
when price rises by 20% the consumer continuous to spend Rupees
1500 on the good calculate the elasticity of demand by percentage
method

Komal Rani · Accepted Answer

Dear Student

<img src=
"http://cdn%20economicsdiscussion%20net/wp-content/uploads/2016/12/clip_image003_thumb-1%20png">
Initial expenditure= RS 1500
Initial price = Rs 10
So, initial quantity = 1500/10 = 150

Final expenditure = Rs 1500
Percentage fall in price = 20%
So, final price = 10−20%×10= 10 - 2 = 8
So, final quantity = 1500/8 = 187 5

Elasticity of demand =
change in QD/ Change in Price * P/QD
= 187 5- 150 / 10 - 8 * 10/150
= 18 75 * 0 067
= 1 25

Regards

consumer spend Rupees 1500 on a good price at rupees 10 per unit .when price rises by 20% the consumer continuous to spend Rupees 1500 on the good calculate the elasticity of demand by percentage method