The price of a commodity is Rs 20 per unit and the total expenditure is Rs 1000 With a - Economics - Theory of Consumer Behaviour

Question

The price of a commodity is Rs 20 per unit and the total
expenditure is Rs 1000 With a fall in its price to Rs18 per unit,
total expenditure increases by 8% Calculate its elasticity of
demand by the percentage method

Dhruv Ahuja · Answer

Hi
we know that TE is given as 1000 when price falls it increases by 8
%so there exist inverse relationship between price and TE Therefore
when TE increares so new TE is 1000 multiplied by 8% we get 80 new
TE is 1000 plus 80 equals 1080 now you can calculate quantity by
dividing TE by Price and hence apply the formula

The price of a commodity is Rs 20 per unit and the total expenditure is Rs 1000. With a fall in its price to Rs18 per unit, total expenditure increases by 8%. Calculate its elasticity of demand by the percentage method