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If the demand for a product reduces by 2% as a result of an increase in the price by 10%, what is the Price Elasticity of Demand for the product?
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Price Elasticity of Demand Calculation
To calculate the Price Elasticity of Demand (PED), we can use the formula:
PED = (% Change in Quantity Demanded) / (% Change in Price)
Given that the demand for the product reduces by 2% as a result of an increase in price by 10%, we can substitute these values into the formula to find the PED.

Calculate % Change in Quantity Demanded
- % Change in Quantity Demanded = -2% (since the demand reduces)

Calculate % Change in Price
- % Change in Price = 10%

Calculate Price Elasticity of Demand (PED)
- PED = (-2%) / (10%) = -0.2

Interpretation of Price Elasticity of Demand
- Since the PED is -0.2, it indicates that the product has inelastic demand. This means that the quantity demanded is not very responsive to changes in price. In this case, a 10% increase in price led to a 2% decrease in demand, showing that consumers are not very sensitive to price changes for this product.
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If the demand for a product reduces by 2% as a result of an increase in the price by 10%, what is the Price Elasticity of Demand for the product?
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If the demand for a product reduces by 2% as a result of an increase in the price by 10%, what is the Price Elasticity of Demand for the product? 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 If the demand for a product reduces by 2% as a result of an increase in the price by 10%, what is the Price Elasticity of Demand for the product? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the demand for a product reduces by 2% as a result of an increase in the price by 10%, what is the Price Elasticity of Demand for the product?.
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