CA Foundation Exam > CA Foundation Questions > A consumer spends Rs. 80 on a commodity when ...
Start Learning for Free
A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.?
Most Upvoted Answer
A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per un...
Calculation of Price Elasticity Coefficient of Demand
To calculate the price elasticity coefficient of demand, we need to use the formula:
Price Elasticity of Demand = (% change in quantity demanded) / (% change in price)
We can calculate the % change in quantity demanded as follows:
% Change in Quantity Demanded = (New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded x 100%
When the price of the commodity was Rs. 1, the consumer spent Rs. 80, which means the quantity demanded was 80 units. When the price increased to Rs. 2, the consumer spent Rs. 96, which means the quantity demanded was 48 units.
% Change in Quantity Demanded = (48 - 80) / 80 x 100% = -40%
We can calculate the % change in price as follows:
% Change in Price = (New Price - Old Price) / Old Price x 100%
% Change in Price = (2 - 1) / 1 x 100% = 100%
Now we can calculate the price elasticity coefficient of demand:
Price Elasticity of Demand = (% change in quantity demanded) / (% change in price)
Price Elasticity of Demand = (-40%) / (100%) = -0.4
Interpretation of Price Elasticity Coefficient of Demand
The price elasticity coefficient of demand is -0.4, which means that the commodity is inelastic. This means that the change in price has a smaller effect on the quantity demanded. In this case, when the price doubled, the quantity demanded decreased by only 40%. This suggests that the commodity is a necessity or has few substitutes.
To calculate the price elasticity coefficient of demand, we need to use the formula:
Price Elasticity of Demand = (% change in quantity demanded) / (% change in price)
We can calculate the % change in quantity demanded as follows:
% Change in Quantity Demanded = (New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded x 100%
When the price of the commodity was Rs. 1, the consumer spent Rs. 80, which means the quantity demanded was 80 units. When the price increased to Rs. 2, the consumer spent Rs. 96, which means the quantity demanded was 48 units.
% Change in Quantity Demanded = (48 - 80) / 80 x 100% = -40%
We can calculate the % change in price as follows:
% Change in Price = (New Price - Old Price) / Old Price x 100%
% Change in Price = (2 - 1) / 1 x 100% = 100%
Now we can calculate the price elasticity coefficient of demand:
Price Elasticity of Demand = (% change in quantity demanded) / (% change in price)
Price Elasticity of Demand = (-40%) / (100%) = -0.4
Interpretation of Price Elasticity Coefficient of Demand
The price elasticity coefficient of demand is -0.4, which means that the commodity is inelastic. This means that the change in price has a smaller effect on the quantity demanded. In this case, when the price doubled, the quantity demanded decreased by only 40%. This suggests that the commodity is a necessity or has few substitutes.
Community Answer
A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per un...
P1 = 1 , Q1 = Expenditure/ P1 = 80/1 = 80
P2 = 2, Q2 = Expenditure/P2 = 96/2 =48
Coefficient of price elasticity
= Q2- Q1/Q2+Q1 × P2+P1/P2-P1
= 48 - 80/48+80 × 3/1
= -32/128 × 3
= -0.75
P2 = 2, Q2 = Expenditure/P2 = 96/2 =48
Coefficient of price elasticity
= Q2- Q1/Q2+Q1 × P2+P1/P2-P1
= 48 - 80/48+80 × 3/1
= -32/128 × 3
= -0.75
Attention CA Foundation Students!
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.
|
Explore Courses for CA Foundation exam
|
|
Similar CA Foundation Doubts
Top Courses for CA FoundationView all
A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.?
Question Description
A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.? 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 A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.?.
A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.? 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 A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.?.
Solutions for A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.? 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 A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.? defined & explained in the simplest way possible. Besides giving the explanation of
A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.?, a detailed solution for A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.? has been provided alongside types of A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.? theory, EduRev gives you an
ample number of questions to practice A consumer spends Rs. 80 on a commodity when its price is Rs. 1 per unit and spends Rs. 96 when the price rises to Rs. 2 per unit. Calculate the price elasticity coefficient of demand for the commodity.? tests, examples and also practice CA Foundation tests.
|
|
Explore Courses for CA Foundation 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
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup