Answer to Question #154455 in Microeconomics for sharadha

Question

calculate the price elasticity of demand for a commodity when its price increase by 50% and quantity demanded falls to 240 units from 300 units

Answer 1

Price elasticity of demand $=\%$ change in quantity$/$ $\%$ change in price

$\%$ change in price $=50\%$

$\%$ change in quantity $=\frac{(240-300)}{300}\times 100\%=-20\%$

Price elasticity of demand $=-20/50=-0.4$

Price elasticity of demand$=|-0.4|=0.4$