CA Foundation Exam > CA Foundation Questions > The price of a commodity were increased form ...
Start Learning for Free
The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)
- a)0.66
- b)0.33
- c)1.00
- d)1.5
Correct answer is 'A'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
The price of a commodity were increased form Rs. 4 to Rs. 6. As a resu...
Change in quantity is 33.333% and in price is 50% so it is 0..666
Most Upvoted Answer
The price of a commodity were increased form Rs. 4 to Rs. 6. As a resu...
Understanding Price Elasticity of Demand
Price elasticity of demand (PED) measures how sensitive the quantity demanded of a good is to a change in its price. It is calculated using the formula:
PED = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
Given Data
- Initial Price (P1) = Rs. 4
- New Price (P2) = Rs. 6
- Initial Quantity (Q1) = 15 units
- New Quantity (Q2) = 10 units
Calculating Changes
1. Change in Price:
- Change in Price = P2 - P1 = 6 - 4 = Rs. 2
- Percentage Change in Price = (Change in Price / P1) * 100 = (2 / 4) * 100 = 50%
2. Change in Quantity Demanded:
- Change in Quantity Demanded = Q2 - Q1 = 10 - 15 = -5 units
- Percentage Change in Quantity Demanded = (Change in Quantity / Q1) * 100 = (-5 / 15) * 100 = -33.33%
Calculating Price Elasticity
Using the above percentage changes, we can now find the price elasticity:
- PED = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
- PED = (-33.33%) / (50%) = -0.6666
Since we consider the absolute value for elasticity, we take:
- |PED| = 0.6666, which rounds to 0.66
Conclusion
The price elasticity of demand is approximately 0.66, indicating that demand is inelastic (less responsive to price changes). Thus, the correct answer is option A: 0.66.
Price elasticity of demand (PED) measures how sensitive the quantity demanded of a good is to a change in its price. It is calculated using the formula:
PED = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
Given Data
- Initial Price (P1) = Rs. 4
- New Price (P2) = Rs. 6
- Initial Quantity (Q1) = 15 units
- New Quantity (Q2) = 10 units
Calculating Changes
1. Change in Price:
- Change in Price = P2 - P1 = 6 - 4 = Rs. 2
- Percentage Change in Price = (Change in Price / P1) * 100 = (2 / 4) * 100 = 50%
2. Change in Quantity Demanded:
- Change in Quantity Demanded = Q2 - Q1 = 10 - 15 = -5 units
- Percentage Change in Quantity Demanded = (Change in Quantity / Q1) * 100 = (-5 / 15) * 100 = -33.33%
Calculating Price Elasticity
Using the above percentage changes, we can now find the price elasticity:
- PED = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
- PED = (-33.33%) / (50%) = -0.6666
Since we consider the absolute value for elasticity, we take:
- |PED| = 0.6666, which rounds to 0.66
Conclusion
The price elasticity of demand is approximately 0.66, indicating that demand is inelastic (less responsive to price changes). Thus, the correct answer is option A: 0.66.
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
The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer?
Question Description
The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer? 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 The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer?.
The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer? 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 The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer?.
Solutions for The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer? 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 The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer?, a detailed solution for The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer? has been provided alongside types of The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice The price of a commodity were increased form Rs. 4 to Rs. 6. As a result demand decreased form 15 units to 10 units. What is the price elasticity? (Point elasticity)a)0.66b)0.33c)1.00d)1.5Correct answer is 'A'. Can you explain this answer? 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
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup