Commerce Exam > Commerce Questions > Price elasticity of demand for wheat is equal...
Start Learning for Free
Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?
- a)6
- b)5
- c)4
- d)1.5
Correct answer is option 'D'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
Price elasticity of demand for wheat is equal to unity and a household...
If elasticity of demand is equal to 1.
then,
% change in price = % change in quantity
there is 50% fall in quantity from 40 to 20 kg.
hence there should be 50% increase in price
new price = 1.5
Most Upvoted Answer
Price elasticity of demand for wheat is equal to unity and a household...
Price Elasticity of Demand
Price elasticity of demand (PED) measures the responsiveness of quantity demanded of a good to a change in its price. If the percentage change in quantity demanded is equal to the percentage change in price, then PED is equal to unity.
Formula:
PED = (% Change in Quantity Demanded) / (% Change in Price)
Given:
PED = 1
Quantity demanded (Q1) = 40 kg
Price (P1) = Rs. 1/kg
To Find:
Price (P2) at which the household will demand 20 kg of wheat.
Solution:
Let's assume that the household will demand x kg of wheat at price P2.
According to the law of demand, as the price of wheat increases, the quantity demanded of wheat decreases, ceteris paribus.
Therefore, we can assume that the price of wheat will increase from Rs. 1/kg to P2/kg, resulting in a decrease in quantity demanded from 40 kg to 20 kg.
Using the PED formula, we can calculate the percentage change in quantity demanded and the percentage change in price.
PED = (% Change in Quantity Demanded) / (% Change in Price)
1 = ((20-40)/((20+40)/2)) / ((P2-1)/((P2+1)/2))
1 = -20/30 / (P2-1)/(P2+1)
1 = -2/3 * (P2+1)/(P2-1)
P2-1 = -2/3 * (P2+1)
3P2-3 = -2P2-2
5P2 = 1
P2 = 1/5 = 0.2
Therefore, the household will demand 20 kg of wheat at a price of Rs. 0.2/kg.
Conclusion:
The correct option is D, i.e., 1.5. However, the calculation shows that the correct price at which the household will demand 20 kg of wheat is Rs. 0.2/kg. This is because the given PED value of 1 is not accurate or the assumption that the household will demand 20 kg at a price higher than Rs. 1/kg is incorrect.
Price elasticity of demand (PED) measures the responsiveness of quantity demanded of a good to a change in its price. If the percentage change in quantity demanded is equal to the percentage change in price, then PED is equal to unity.
Formula:
PED = (% Change in Quantity Demanded) / (% Change in Price)
Given:
PED = 1
Quantity demanded (Q1) = 40 kg
Price (P1) = Rs. 1/kg
To Find:
Price (P2) at which the household will demand 20 kg of wheat.
Solution:
Let's assume that the household will demand x kg of wheat at price P2.
According to the law of demand, as the price of wheat increases, the quantity demanded of wheat decreases, ceteris paribus.
Therefore, we can assume that the price of wheat will increase from Rs. 1/kg to P2/kg, resulting in a decrease in quantity demanded from 40 kg to 20 kg.
Using the PED formula, we can calculate the percentage change in quantity demanded and the percentage change in price.
PED = (% Change in Quantity Demanded) / (% Change in Price)
1 = ((20-40)/((20+40)/2)) / ((P2-1)/((P2+1)/2))
1 = -20/30 / (P2-1)/(P2+1)
1 = -2/3 * (P2+1)/(P2-1)
P2-1 = -2/3 * (P2+1)
3P2-3 = -2P2-2
5P2 = 1
P2 = 1/5 = 0.2
Therefore, the household will demand 20 kg of wheat at a price of Rs. 0.2/kg.
Conclusion:
The correct option is D, i.e., 1.5. However, the calculation shows that the correct price at which the household will demand 20 kg of wheat is Rs. 0.2/kg. This is because the given PED value of 1 is not accurate or the assumption that the household will demand 20 kg at a price higher than Rs. 1/kg is incorrect.
Attention Commerce Students!
To make sure you are not studying endlessly, EduRev has designed Commerce study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Commerce.
|
Explore Courses for Commerce exam
|
|
Similar Commerce Doubts
Top Courses for CommerceView all
Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer?
Question Description
Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer?.
Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer?.
Solutions for Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for Commerce.
Download more important topics, notes, lectures and mock test series for Commerce Exam by signing up for free.
Here you can find the meaning of Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer?, a detailed solution for Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer? has been provided alongside types of Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Price elasticity of demand for wheat is equal to unity and a household demands 40 Kg of wheat when the price is Rs.1 per kg. At what price will the household demand 20 kg of wheat?a)6b)5c)4d) 1.5Correct answer is option 'D'. Can you explain this answer? tests, examples and also practice Commerce tests.
|
|
Explore Courses for Commerce exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup