Answer to Question #134914 in Economics of Enterprise for Ruchene

Question

A government reduces tax on carrot. This causes the price of carrots to fall by 50%. Demand then rises by 50% . The price elasticity of demand for carrots in this case is?

Answer 1

Price Elasticity of demand (PED);

=$\frac{ change in quantity demanded} { change in price}$

=$\frac{50}{50}$ =1

Hence PED= 1