A 5% fall in price of a good races it demand from 300 unit to 318 units. Calculate the elasticity?

Question

Answer

Well lets solve this step by step.. As it is given in the question original quantity =300 units, new quantity =318 units.. So, Change in quantity =new quantity - original quantity =318-300 =18 units.. Now % fall in price is already given i.e - 5 %.. We hve to frst find out % Change in quantity demand... i.e %change in quantity demand =change in quantity /original quantity *100 =18/300 *100 =6%..now price elasticity of demand =% change in quantity demand /% change in price = 6/-5=(-)1.2... Hence Ed =(-) 1.2 i.e demand is highly elastic...

Answer

Fall in price= 5% raise in demand=18/300×100=6% elasticity =(-)6%/5%=-1.2 thus,elasticity is 1.2

Answer

Calculating the Elasticity of Demand

Introduction:
Elasticity of demand is a measure of how much the quantity demanded of a good changes in response to a change in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, we will be calculating the elasticity of demand for a good that has experienced a 5% fall in price.

Calculating the Percentage Change in Price and Quantity Demanded:
To calculate the elasticity of demand, we first need to calculate the percentage change in price and quantity demanded. We know that the price of the good has fallen by 5%, so we can calculate the percentage change in price as follows:

Percentage Change in Price = (New Price - Old Price) / Old Price x 100%
Percentage Change in Price = (1 - 0.95) / 0.95 x 100%
Percentage Change in Price = 5.26%

We also know that the quantity demanded has increased from 300 units to 318 units, so we can calculate the percentage change in quantity demanded as follows:

Percentage Change in Quantity Demanded = (New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded x 100%
Percentage Change in Quantity Demanded = (318 - 300) / 300 x 100%
Percentage Change in Quantity Demanded = 6%

Calculating the Elasticity of Demand:
Now that we have calculated the percentage change in price and quantity demanded, we can calculate the elasticity of demand using the following formula:

Elasticity of Demand = Percentage Change in Quantity Demanded / Percentage Change in Price

Elasticity of Demand = 6% / 5.26%
Elasticity of Demand = 1.14

Interpreting the Elasticity of Demand:
The elasticity of demand for this good is 1.14, which means that the demand for this good is relatively elastic. This means that a small change in price will result in a relatively large change in the quantity demanded. In this case, a 5% fall in price resulted in a 6% increase in quantity demanded. This suggests that consumers are quite sensitive to changes in the price of this good and will likely switch to substitutes if the price increases.

Answer

Given: % change in price=-5% Q=300(Old quantity) q=318(Old quantity)
now, % change in quantity =(q-Q)/Q*100 =6%price elasticity of demand =%change in quantity /%change in price =6/5=1.2
so, elasticity of demand is 1.2

Answer

Highly elastic @ More then One(ed>1)

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