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(Direction 142 - 147) Read the follwing question.
In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:
• Only 200 litres of milk was sold every month.
• The number of boxes of cereal customers bought went down from 280 to 240.
• The number of packets of powered milk customers bought went up from 90 to 220 per month.
 
Q. The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)
  • a)
    2.5
  • b)
    1.0
  • c)
    1.66
  • d)
    2 .66
Correct answer is option 'C'. Can you explain this answer?
Most Upvoted Answer
(Direction 142 - 147) Read the follwing question.In Econoville, there ...
Calculating Price Elasticity of Demand Using Arc Elasticity Method

To calculate the price elasticity of demand using the arc elasticity method, we need to use the following formula:

Elasticity of Demand = ((Q2 - Q1) / ((Q2 + Q1) / 2)) / ((P2 - P1) / ((P2 + P1) / 2))

Where:
Q1 = initial quantity demanded
Q2 = new quantity demanded
P1 = initial price
P2 = new price

Given data:
Q1 = 400 litres
Q2 = 200 litres
P1 = Rs. 20 per litre
P2 = Rs. 30 per litre

Calculating the Elasticity of Demand:

((200 - 400) / ((200 + 400) / 2)) / ((30 - 20) / ((30 + 20) / 2))
= (-200 / 300) / (10 / 25)
= (-2/3) / (2/5)
= -1.666

Therefore, the price elasticity of demand when fresh milk's price increases from Rs. 20 per litre to Rs. 30 per litre is equal to 1.66.

Explanation:

The elasticity of demand measures the responsiveness of consumers to changes in price. In this case, the price of fresh milk has increased from Rs. 20 per litre to Rs. 30 per litre, resulting in a decrease in the quantity demanded from 400 litres to 200 litres.

The price elasticity of demand is considered elastic when the absolute value of elasticity is greater than 1. In this case, the elasticity of demand is -1.666, which is greater than 1, indicating that the demand for fresh milk is elastic. This means that a 10% increase in price results in a more than 10% decrease in quantity demanded.

Therefore, the grocery shop, Ecoconvenience, needs to consider reducing the price of fresh milk to increase the quantity demanded by customers.
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(Direction 142 - 147) Read the follwing question.In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:• Only 200 litres of milk was sold every month.• The number of boxes of cereal customers bought went down from 280 to 240.• The number of packets of powered milk customers bought went up from 90 to 220 per month.Q.The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)a)2.5b)1.0c)1.66d)2 .66Correct answer is option 'C'. Can you explain this answer?
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(Direction 142 - 147) Read the follwing question.In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:• Only 200 litres of milk was sold every month.• The number of boxes of cereal customers bought went down from 280 to 240.• The number of packets of powered milk customers bought went up from 90 to 220 per month.Q.The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)a)2.5b)1.0c)1.66d)2 .66Correct answer is option 'C'. Can you explain this answer? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about (Direction 142 - 147) Read the follwing question.In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:• Only 200 litres of milk was sold every month.• The number of boxes of cereal customers bought went down from 280 to 240.• The number of packets of powered milk customers bought went up from 90 to 220 per month.Q.The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)a)2.5b)1.0c)1.66d)2 .66Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for (Direction 142 - 147) Read the follwing question.In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:• Only 200 litres of milk was sold every month.• The number of boxes of cereal customers bought went down from 280 to 240.• The number of packets of powered milk customers bought went up from 90 to 220 per month.Q.The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)a)2.5b)1.0c)1.66d)2 .66Correct answer is option 'C'. Can you explain this answer?.
Solutions for (Direction 142 - 147) Read the follwing question.In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:• Only 200 litres of milk was sold every month.• The number of boxes of cereal customers bought went down from 280 to 240.• The number of packets of powered milk customers bought went up from 90 to 220 per month.Q.The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)a)2.5b)1.0c)1.66d)2 .66Correct answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for CA Foundation. Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
Here you can find the meaning of (Direction 142 - 147) Read the follwing question.In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:• Only 200 litres of milk was sold every month.• The number of boxes of cereal customers bought went down from 280 to 240.• The number of packets of powered milk customers bought went up from 90 to 220 per month.Q.The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)a)2.5b)1.0c)1.66d)2 .66Correct answer is option 'C'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of (Direction 142 - 147) Read the follwing question.In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:• Only 200 litres of milk was sold every month.• The number of boxes of cereal customers bought went down from 280 to 240.• The number of packets of powered milk customers bought went up from 90 to 220 per month.Q.The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)a)2.5b)1.0c)1.66d)2 .66Correct answer is option 'C'. Can you explain this answer?, a detailed solution for (Direction 142 - 147) Read the follwing question.In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:• Only 200 litres of milk was sold every month.• The number of boxes of cereal customers bought went down from 280 to 240.• The number of packets of powered milk customers bought went up from 90 to 220 per month.Q.The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)a)2.5b)1.0c)1.66d)2 .66Correct answer is option 'C'. Can you explain this answer? has been provided alongside types of (Direction 142 - 147) Read the follwing question.In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:• Only 200 litres of milk was sold every month.• The number of boxes of cereal customers bought went down from 280 to 240.• The number of packets of powered milk customers bought went up from 90 to 220 per month.Q.The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)a)2.5b)1.0c)1.66d)2 .66Correct answer is option 'C'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice (Direction 142 - 147) Read the follwing question.In Econoville, there is one grocery shop, Ecoconvenience. It used to sell fresh milk at Rs. 20 per litre, at which price 400 litres of milk were sold per month. After some time, the price was raised to Rs. 30 per litre. Following the price rise:• Only 200 litres of milk was sold every month.• The number of boxes of cereal customers bought went down from 280 to 240.• The number of packets of powered milk customers bought went up from 90 to 220 per month.Q.The price elasticity of demand when fresh milk’s price increases from Rs. 20 per litre to Rs. 30 per litre is equal to: (use Arc Elasticity Method)a)2.5b)1.0c)1.66d)2 .66Correct answer is option 'C'. Can you explain this answer? tests, examples and also practice CA Foundation tests.
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