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The market price of good changes from ₹5to₹6 .As a result the quantity demanded by the consumer falls by 15 units .The price elasticity of demand is 0.5 .Find the initial and final level quantity demanded?
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The market price of good changes from ₹5to₹6 .As a result the quantity...
Understanding Price Elasticity of Demand
Price elasticity of demand measures how the quantity demanded of a good responds to changes in its price. It is calculated using the formula:
Price Elasticity of Demand (PED) = (% Change in Quantity Demanded) / (% Change in Price)
Given the data:
- Initial Price (P1) = ₹5
- Final Price (P2) = ₹6
- Change in Quantity Demanded = -15 units
- Price Elasticity of Demand = 0.5
Calculating the Percentage Change in Price
- Change in Price = P2 - P1 = ₹6 - ₹5 = ₹1
- Percentage Change in Price = (Change in Price / Initial Price) * 100
= (1 / 5) * 100 = 20%
Finding the Initial Quantity Demanded
Using the elasticity formula:
0.5 = (% Change in Quantity Demanded) / 20%
Now, we need to find the % Change in Quantity Demanded:
- % Change in Quantity Demanded = 0.5 * 20% = 10%
Since the quantity demanded falls by 15 units, we can set up the following equation:
- Initial Quantity Demanded (Q1) = Q2 + 15
Let’s find the relationship:
- 10% = (15 / Q1) * 100
Rearranging the equation:
- Q1 = (15 * 100) / 10 = 150 units
Final Quantity Demanded
Now that we have the initial quantity demanded:
- Q1 = 150 units
- Q2 = Q1 - 15 = 150 - 15 = 135 units
Summary
- Initial Quantity Demanded: 150 units
- Final Quantity Demanded: 135 units
These calculations show the effect of price changes on consumer demand, illustrating the concept of price elasticity of demand effectively.
Price elasticity of demand measures how the quantity demanded of a good responds to changes in its price. It is calculated using the formula:
Price Elasticity of Demand (PED) = (% Change in Quantity Demanded) / (% Change in Price)
Given the data:
- Initial Price (P1) = ₹5
- Final Price (P2) = ₹6
- Change in Quantity Demanded = -15 units
- Price Elasticity of Demand = 0.5
Calculating the Percentage Change in Price
- Change in Price = P2 - P1 = ₹6 - ₹5 = ₹1
- Percentage Change in Price = (Change in Price / Initial Price) * 100
= (1 / 5) * 100 = 20%
Finding the Initial Quantity Demanded
Using the elasticity formula:
0.5 = (% Change in Quantity Demanded) / 20%
Now, we need to find the % Change in Quantity Demanded:
- % Change in Quantity Demanded = 0.5 * 20% = 10%
Since the quantity demanded falls by 15 units, we can set up the following equation:
- Initial Quantity Demanded (Q1) = Q2 + 15
Let’s find the relationship:
- 10% = (15 / Q1) * 100
Rearranging the equation:
- Q1 = (15 * 100) / 10 = 150 units
Final Quantity Demanded
Now that we have the initial quantity demanded:
- Q1 = 150 units
- Q2 = Q1 - 15 = 150 - 15 = 135 units
Summary
- Initial Quantity Demanded: 150 units
- Final Quantity Demanded: 135 units
These calculations show the effect of price changes on consumer demand, illustrating the concept of price elasticity of demand effectively.
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The market price of good changes from ₹5to₹6 .As a result the quantity demanded by the consumer falls by 15 units .The price elasticity of demand is 0.5 .Find the initial and final level quantity demanded?
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The market price of good changes from ₹5to₹6 .As a result the quantity demanded by the consumer falls by 15 units .The price elasticity of demand is 0.5 .Find the initial and final level quantity demanded? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about The market price of good changes from ₹5to₹6 .As a result the quantity demanded by the consumer falls by 15 units .The price elasticity of demand is 0.5 .Find the initial and final level quantity demanded? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The market price of good changes from ₹5to₹6 .As a result the quantity demanded by the consumer falls by 15 units .The price elasticity of demand is 0.5 .Find the initial and final level quantity demanded?.
The market price of good changes from ₹5to₹6 .As a result the quantity demanded by the consumer falls by 15 units .The price elasticity of demand is 0.5 .Find the initial and final level quantity demanded? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about The market price of good changes from ₹5to₹6 .As a result the quantity demanded by the consumer falls by 15 units .The price elasticity of demand is 0.5 .Find the initial and final level quantity demanded? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The market price of good changes from ₹5to₹6 .As a result the quantity demanded by the consumer falls by 15 units .The price elasticity of demand is 0.5 .Find the initial and final level quantity demanded?.
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