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The original price of commodity is Rs.500 and quantity demanded is 20 kgs. If price rises to Rs.750 and quantity demanded reduces to 15 kgs, price elasticity of demand is _____
- a)0.25
- b)0.50
- c)1.00
- d)1.50
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
The original price of commodity is Rs.500 andquantity demanded is 20 k...
Price Elasticity of Demand:
Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. The formula for price elasticity of demand is:
\(\text{Price Elasticity of Demand} = \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Price}}\)
Given Information:
Original price (P1) = Rs.500
Quantity demanded at original price (Q1) = 20 kgs
New price (P2) = Rs.750
Quantity demanded at new price (Q2) = 15 kgs
Calculating Percentage Change in Quantity Demanded:
Percentage change in quantity demanded is calculated using the following formula:
\(\text{Percentage Change in Quantity Demanded} = \frac{\text{Change in Quantity Demanded}}{\text{Original Quantity Demanded}} \times 100\)
Change in quantity demanded = Q2 - Q1 = 15 - 20 = -5 kgs
\(\text{Percentage Change in Quantity Demanded} = \frac{-5}{20} \times 100 = -25\%\)
Calculating Percentage Change in Price:
Percentage change in price is calculated using the following formula:
\(\text{Percentage Change in Price} = \frac{\text{Change in Price}}{\text{Original Price}} \times 100\)
Change in price = P2 - P1 = 750 - 500 = 250
\(\text{Percentage Change in Price} = \frac{250}{500} \times 100 = 50\%\)
Calculating Price Elasticity of Demand:
Now, substituting the calculated percentage changes into the formula for price elasticity of demand:
\(\text{Price Elasticity of Demand} = \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Price}} = \frac{-25\%}{50\%} = -0.5\)
Since the calculated price elasticity of demand is negative, we take the absolute value to obtain the magnitude of elasticity.
Price Elasticity of Demand = |-0.5| = 0.5
Conclusion:
The price elasticity of demand is 0.5. Therefore, the correct answer is option B) 0.50. This indicates that the quantity demanded is relatively inelastic, meaning that a change in price has a less-than-proportional effect on the quantity demanded.
Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. The formula for price elasticity of demand is:
\(\text{Price Elasticity of Demand} = \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Price}}\)
Given Information:
Original price (P1) = Rs.500
Quantity demanded at original price (Q1) = 20 kgs
New price (P2) = Rs.750
Quantity demanded at new price (Q2) = 15 kgs
Calculating Percentage Change in Quantity Demanded:
Percentage change in quantity demanded is calculated using the following formula:
\(\text{Percentage Change in Quantity Demanded} = \frac{\text{Change in Quantity Demanded}}{\text{Original Quantity Demanded}} \times 100\)
Change in quantity demanded = Q2 - Q1 = 15 - 20 = -5 kgs
\(\text{Percentage Change in Quantity Demanded} = \frac{-5}{20} \times 100 = -25\%\)
Calculating Percentage Change in Price:
Percentage change in price is calculated using the following formula:
\(\text{Percentage Change in Price} = \frac{\text{Change in Price}}{\text{Original Price}} \times 100\)
Change in price = P2 - P1 = 750 - 500 = 250
\(\text{Percentage Change in Price} = \frac{250}{500} \times 100 = 50\%\)
Calculating Price Elasticity of Demand:
Now, substituting the calculated percentage changes into the formula for price elasticity of demand:
\(\text{Price Elasticity of Demand} = \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Price}} = \frac{-25\%}{50\%} = -0.5\)
Since the calculated price elasticity of demand is negative, we take the absolute value to obtain the magnitude of elasticity.
Price Elasticity of Demand = |-0.5| = 0.5
Conclusion:
The price elasticity of demand is 0.5. Therefore, the correct answer is option B) 0.50. This indicates that the quantity demanded is relatively inelastic, meaning that a change in price has a less-than-proportional effect on the quantity demanded.
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The original price of commodity is Rs.500 andquantity demanded is 20 kgs. If price rises toRs.750 and quantity demanded reduces to 15kgs, price elasticity of demand is _____a)0.25b)0.50c)1.00d)1.50Correct answer is option 'B'. Can you explain this answer?
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The original price of commodity is Rs.500 andquantity demanded is 20 kgs. If price rises toRs.750 and quantity demanded reduces to 15kgs, price elasticity of demand is _____a)0.25b)0.50c)1.00d)1.50Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The original price of commodity is Rs.500 andquantity demanded is 20 kgs. If price rises toRs.750 and quantity demanded reduces to 15kgs, price elasticity of demand is _____a)0.25b)0.50c)1.00d)1.50Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The original price of commodity is Rs.500 andquantity demanded is 20 kgs. If price rises toRs.750 and quantity demanded reduces to 15kgs, price elasticity of demand is _____a)0.25b)0.50c)1.00d)1.50Correct answer is option 'B'. Can you explain this answer?.
The original price of commodity is Rs.500 andquantity demanded is 20 kgs. If price rises toRs.750 and quantity demanded reduces to 15kgs, price elasticity of demand is _____a)0.25b)0.50c)1.00d)1.50Correct answer is option 'B'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about The original price of commodity is Rs.500 andquantity demanded is 20 kgs. If price rises toRs.750 and quantity demanded reduces to 15kgs, price elasticity of demand is _____a)0.25b)0.50c)1.00d)1.50Correct answer is option 'B'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The original price of commodity is Rs.500 andquantity demanded is 20 kgs. If price rises toRs.750 and quantity demanded reduces to 15kgs, price elasticity of demand is _____a)0.25b)0.50c)1.00d)1.50Correct answer is option 'B'. Can you explain this answer?.
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The original price of commodity is Rs.500 andquantity demanded is 20 kgs. If price rises toRs.750 and quantity demanded reduces to 15kgs, price elasticity of demand is _____a)0.25b)0.50c)1.00d)1.50Correct answer is option 'B'. Can you explain this answer?, a detailed solution for The original price of commodity is Rs.500 andquantity demanded is 20 kgs. If price rises toRs.750 and quantity demanded reduces to 15kgs, price elasticity of demand is _____a)0.25b)0.50c)1.00d)1.50Correct answer is option 'B'. Can you explain this answer? has been provided alongside types of The original price of commodity is Rs.500 andquantity demanded is 20 kgs. If price rises toRs.750 and quantity demanded reduces to 15kgs, price elasticity of demand is _____a)0.25b)0.50c)1.00d)1.50Correct answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
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