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A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.
After some time, he raises the price to Rs. 15 per pen. Following the price rise:
After some time, he raises the price to Rs. 15 per pen. Following the price rise:
• Only 60 pens were sold every month.
• The number of refills bought went down from 200 to 150.
• The number of ink pen customers bought went up from 90 to 180 per month.
Q. What can be said about the price elasticity of demand for pen?
- a)It is perfectly elastic
- b)It is elastic
- c)It is perfectly inelastic
- d)It is inelastic
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sel...
Price Elasticity of Demand for Pen
Price elasticity of demand measures the responsiveness of demand for a product to a change in its price. It is calculated as the percentage change in the quantity demanded divided by the percentage change in price.
In this scenario, the shopkeeper raised the price of gel pen from Rs. 10 to Rs. 15, resulting in the following changes:
- Quantity demanded decreased from 120 to 60 pens per month, a decrease of 50%.
- Price increased from Rs. 10 to Rs. 15 per pen, an increase of 50%.
Using the formula, the price elasticity of demand for pen can be calculated as:
Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)
= (-50%) / (+50%)
= -1
Since the price elasticity of demand is negative, it indicates that demand for pen is inversely related to its price. This means that when the price of pen increases, the quantity demanded decreases and vice versa.
Interpretation
- Elasticity Coefficient: The value of elasticity coefficient is greater than 1, indicating that the demand for pen is elastic. This means that a small change in the price of pen leads to a proportionately larger change in the quantity demanded.
- Price Increase: When the shopkeeper increased the price of pen from Rs. 10 to Rs. 15, the quantity demanded decreased from 120 to 60 per month. This implies that consumers are sensitive to price changes and are willing to switch to substitutes if the price of pen is too high.
- Cross Elasticity: The decrease in the sales of refills from 200 to 150 and increase in sales of ink pens from 90 to 180 suggest that there are close substitutes available for pen in the market. Consumers are willing to switch to alternative products if the price of pen becomes too expensive.
- Implications: The shopkeeper needs to be careful while pricing his products. A high price may result in a decrease in sales and a loss of customers. A lower price may increase sales but may not result in higher profits due to lower margins. The shopkeeper needs to find the right balance between price and quantity demanded to maximize his profits.
Price elasticity of demand measures the responsiveness of demand for a product to a change in its price. It is calculated as the percentage change in the quantity demanded divided by the percentage change in price.
In this scenario, the shopkeeper raised the price of gel pen from Rs. 10 to Rs. 15, resulting in the following changes:
- Quantity demanded decreased from 120 to 60 pens per month, a decrease of 50%.
- Price increased from Rs. 10 to Rs. 15 per pen, an increase of 50%.
Using the formula, the price elasticity of demand for pen can be calculated as:
Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)
= (-50%) / (+50%)
= -1
Since the price elasticity of demand is negative, it indicates that demand for pen is inversely related to its price. This means that when the price of pen increases, the quantity demanded decreases and vice versa.
Interpretation
- Elasticity Coefficient: The value of elasticity coefficient is greater than 1, indicating that the demand for pen is elastic. This means that a small change in the price of pen leads to a proportionately larger change in the quantity demanded.
- Price Increase: When the shopkeeper increased the price of pen from Rs. 10 to Rs. 15, the quantity demanded decreased from 120 to 60 per month. This implies that consumers are sensitive to price changes and are willing to switch to substitutes if the price of pen is too high.
- Cross Elasticity: The decrease in the sales of refills from 200 to 150 and increase in sales of ink pens from 90 to 180 suggest that there are close substitutes available for pen in the market. Consumers are willing to switch to alternative products if the price of pen becomes too expensive.
- Implications: The shopkeeper needs to be careful while pricing his products. A high price may result in a decrease in sales and a loss of customers. A lower price may increase sales but may not result in higher profits due to lower margins. The shopkeeper needs to find the right balance between price and quantity demanded to maximize his profits.
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A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sel...
Price elasticity of demand for pen, Ed
= (Q2-Q1/Q2+Q1) × (P2+P1/P2-P1)
=( 60 - 120 / 60+120) × (15+10/15-10)
= (-60/180) × (25/5)
= (-) 1.67
As elasticity is greater than one, it is elastic
= (Q2-Q1/Q2+Q1) × (P2+P1/P2-P1)
=( 60 - 120 / 60+120) × (15+10/15-10)
= (-60/180) × (25/5)
= (-) 1.67
As elasticity is greater than one, it is elastic
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A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer?
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A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer?.
A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer? for CA CPT 2024 is part of CA CPT preparation. The Question and answers have been prepared according to the CA CPT exam syllabus. Information about A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA CPT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer?.
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A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer?, a detailed solution for A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer? has been provided alongside types of A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice A shopkeeper sells gel pen at Rs. 10 per pen. At this price he can sell 120 per month.After some time, he raises the price to Rs. 15 per pen. Following the price rise: Only 60 pens were sold every month. The number of refills bought went down from 200 to 150. The number of ink pen customers bought went up from 90 to 180 per month.Q.What can be said about the price elasticity of demand for pen?a)It is perfectly elasticb)It is elasticc)It is perfectly inelasticd)It is inelasticCorrect answer is option 'B'. Can you explain this answer? tests, examples and also practice CA CPT tests.
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