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When price of good falls by 40% the quantity demanded of it increases by 50% find out the price elasticity of demand?
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When price of good falls by 40% the quantity demanded of it increases ...
Price Elasticity of Demand
Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in the price of a good. The formula for price elasticity of demand is:
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
Calculating Price Elasticity of Demand
To calculate the price elasticity of demand in this case, we need to know the percent change in quantity demanded and the percent change in price.
Given that the price of the good falls by 40% and the quantity demanded increases by 50%, we can calculate the percent change in quantity demanded and the percent change in price as follows:
% Change in Quantity Demanded = (New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded x 100%
% Change in Quantity Demanded = (50 - 100) / 100 x 100%
% Change in Quantity Demanded = -50%
% Change in Price = (New Price - Old Price) / Old Price x 100%
% Change in Price = (-40 - 0) / 0 x 100%
% Change in Price = -40%
Substituting the Values
Substituting these values into the formula for price elasticity of demand, we get:
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
Price Elasticity of Demand = -50% / -40%
Price Elasticity of Demand = 1.25
Interpreting the Result
The price elasticity of demand is 1.25, which means that the demand for the good is relatively elastic. This means that a small change in price will lead to a relatively large change in quantity demanded. In this case, a 40% decrease in price led to a 50% increase in quantity demanded, which is consistent with the idea of elastic demand.
Price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in the price of a good. The formula for price elasticity of demand is:
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
Calculating Price Elasticity of Demand
To calculate the price elasticity of demand in this case, we need to know the percent change in quantity demanded and the percent change in price.
Given that the price of the good falls by 40% and the quantity demanded increases by 50%, we can calculate the percent change in quantity demanded and the percent change in price as follows:
% Change in Quantity Demanded = (New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded x 100%
% Change in Quantity Demanded = (50 - 100) / 100 x 100%
% Change in Quantity Demanded = -50%
% Change in Price = (New Price - Old Price) / Old Price x 100%
% Change in Price = (-40 - 0) / 0 x 100%
% Change in Price = -40%
Substituting the Values
Substituting these values into the formula for price elasticity of demand, we get:
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
Price Elasticity of Demand = -50% / -40%
Price Elasticity of Demand = 1.25
Interpreting the Result
The price elasticity of demand is 1.25, which means that the demand for the good is relatively elastic. This means that a small change in price will lead to a relatively large change in quantity demanded. In this case, a 40% decrease in price led to a 50% increase in quantity demanded, which is consistent with the idea of elastic demand.
Community Answer
When price of good falls by 40% the quantity demanded of it increases ...
Price of goods falls by 40%
therefore= %∆p = 40
quantity demanded increases by 50%
therefore = %∆q = 50
elasticity of demand is calculated as
E = %∆q/%∆p = 50/40 = 5/4 = 1.25
1.25 >1
the demand of the commodity is relatively elastic.
therefore= %∆p = 40
quantity demanded increases by 50%
therefore = %∆q = 50
elasticity of demand is calculated as
E = %∆q/%∆p = 50/40 = 5/4 = 1.25
1.25 >1
the demand of the commodity is relatively elastic.
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When price of good falls by 40% the quantity demanded of it increases by 50% find out the price elasticity of demand? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about When price of good falls by 40% the quantity demanded of it increases by 50% find out the price elasticity of demand? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When price of good falls by 40% the quantity demanded of it increases by 50% find out the price elasticity of demand?.
When price of good falls by 40% the quantity demanded of it increases by 50% find out the price elasticity of demand? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about When price of good falls by 40% the quantity demanded of it increases by 50% find out the price elasticity of demand? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When price of good falls by 40% the quantity demanded of it increases by 50% find out the price elasticity of demand?.
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