A consumer spends Rs. 80 on purchasing a commodity when its price is Re. 1 per unit and spends Rs. 96 when the price is Rs. 2 per unit. Calculate the price elasticity of demand. 
  • a)
    0.2
  • b)
    0.3
  • c)
    0.4
  • d)
    0.5
Correct answer is option 'C'. Can you explain this answer?

CA Foundation Question

4 Answers
Chandna Arora answered Jun 05, 2018
Initial Total Expenditure (TEo)=Rs 80
Final Total Expenditure (TE1)=Rs 96
Initial Price (Po)=Rs 1
Final Price (P1)=Rs 2

Now, Quantity Q = TE/P
Qo = 80/1 = 80
Q1 = 96/2 = 48

Now,

Ed=(−)[Po/Qo] x [ΔQ/ΔP]

Ed=(−)1/80 x [48−80]/(2−1)
Ed=(−)1/80 x (−32/1)
Ed=(−)−0.4
Ed=0.4

Thus, the price elasticity of demand is 0.4.

Shaheen Fatma answered Sep 24, 2018
80/96×2 =0.4

Dhanush Surya answered Jun 05, 2018
Any body explain this and how

This discussion on A consumer spends Rs. 80 on purchasing a commodity when its price is Re. 1 per unit and spends Rs. 96 when the price is Rs. 2 per unit. Calculate the price elasticity of demand.a)0.2b)0.3c)0.4d)0.5Correct answer is option 'C'. Can you explain this answer? is done on EduRev Study Group by CA Foundation Students. The Questions and Answers of A consumer spends Rs. 80 on purchasing a commodity when its price is Re. 1 per unit and spends Rs. 96 when the price is Rs. 2 per unit. Calculate the price elasticity of demand.a)0.2b)0.3c)0.4d)0.5Correct answer is option 'C'. Can you explain this answer? are solved by group of students and teacher of CA Foundation, which is also the largest student community of CA Foundation. If the answer is not available please wait for a while and a community member will probably answer this soon. You can study other questions, MCQs, videos and tests for CA Foundation on EduRev and even discuss your questions like A consumer spends Rs. 80 on purchasing a commodity when its price is Re. 1 per unit and spends Rs. 96 when the price is Rs. 2 per unit. Calculate the price elasticity of demand.a)0.2b)0.3c)0.4d)0.5Correct answer is option 'C'. Can you explain this answer? over here on EduRev! Apart from being the largest CA Foundation community, EduRev has the largest solved Question bank for CA Foundation.