Answer to Question #241665 in Macroeconomics for Adi

Question

The price of smartphone is currently rs 200 and the quantity demanded is 4m. Next year the price false to rs 180 and the quantity demanded rises to 6m. What us the price elasticity of demand?

Answer 1

Price elasticity of demand (E_d)=

(Change in quantity demand/ change in price) $\times$ ( price (P₀) / quantity demand (Q₀) )

$P_0 = 200 \\ Q_0=4 \\ P_1 = 180 \\ Q_1 = 6 \\ E_d = \frac{6-4}{180-200} \times \frac{200}{4} \\ = \frac{2}{20} \times 50 \\ = 5$