Question

A drop in the price of lemons from Rs 100 per kg to Rs 60 Per Kg increases the quantity

demanded from 1.75 to 7 kg per week. Calculate the price elasticity of demand

Answer 1

The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price.

Change in price $=40 / 100 = 0.4$

Change in quantity $=5.25 / 1.75 = 3$

$Ep = 3 / 0.4 = 7.5$