Please and no. 45
A consumer buys 20 units of a good at a price of ₹ 5 per unit. He incurs an expenditure of ₹ 120, when he buys 24 units. Calculate price elasticity of demand using the percentage method. Comment upon the likely shape of demand curve based on this information.
Dear student,
45. Given,
initial price= 5
final price= 5
initial quantity demanded= 20
final quantity demanded= 24
So,
% change in price= final price- initial price/ initial price*100= (5-5)/5*100= 0
% change in quantity demanded=final quantity demanded-initial quantity demanded/initial quantity demanded*100= (24-20)/20*100=20
Price Elasticity of Demand= % change in quantity demanded/% change in price= 20/0= infinity
As the demand is perfectly elastic (means a change in price would eliminate all demand for the product), the demand curve will be horizontal straight parallel to the X-axis.
Regards
Regards
45. Given,
initial price= 5
final price= 5
initial quantity demanded= 20
final quantity demanded= 24
So,
% change in price= final price- initial price/ initial price*100= (5-5)/5*100= 0
% change in quantity demanded=final quantity demanded-initial quantity demanded/initial quantity demanded*100= (24-20)/20*100=20
Price Elasticity of Demand= % change in quantity demanded/% change in price= 20/0= infinity
As the demand is perfectly elastic (means a change in price would eliminate all demand for the product), the demand curve will be horizontal straight parallel to the X-axis.
Regards
Regards