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The price of a commodity decreases from 10 to 8 and the quantity demanded of it increases from 25 to 30 units, then the coefficient of price elasticity will be______.
- a)1.00
- b)-1.00
- c)1.5
- d)-1.5
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
The price of a commodity decreases from 10 to 8 and the quantity deman...
Solution:
Price elasticity of demand is the measure of the responsiveness of the quantity demanded of a good to a change in its price.
Given, the initial price of the commodity = $10
Final price of the commodity = $8
Initial quantity demanded of the commodity = 25 units
Final quantity demanded of the commodity = 30 units
We can use the formula for price elasticity of demand to calculate it:
Price elasticity of demand = % change in quantity demanded / % change in price
Calculating the % change in price:
% change in price = (final price - initial price) / (initial price) x 100
% change in price = (8-10) / 10 x 100
% change in price = -20%
Calculating the % change in quantity demanded:
% change in quantity demanded = (final quantity demanded - initial quantity demanded) / (initial quantity demanded) x 100
% change in quantity demanded = (30-25) / 25 x 100
% change in quantity demanded = 20%
Substituting the values in the formula:
Price elasticity of demand = % change in quantity demanded / % change in price
Price elasticity of demand = 20% / -20%
Price elasticity of demand = -1
Therefore, the coefficient of price elasticity of demand for this commodity is -1.00, which indicates that the commodity is price elastic.
Price elasticity of demand is the measure of the responsiveness of the quantity demanded of a good to a change in its price.
Given, the initial price of the commodity = $10
Final price of the commodity = $8
Initial quantity demanded of the commodity = 25 units
Final quantity demanded of the commodity = 30 units
We can use the formula for price elasticity of demand to calculate it:
Price elasticity of demand = % change in quantity demanded / % change in price
Calculating the % change in price:
% change in price = (final price - initial price) / (initial price) x 100
% change in price = (8-10) / 10 x 100
% change in price = -20%
Calculating the % change in quantity demanded:
% change in quantity demanded = (final quantity demanded - initial quantity demanded) / (initial quantity demanded) x 100
% change in quantity demanded = (30-25) / 25 x 100
% change in quantity demanded = 20%
Substituting the values in the formula:
Price elasticity of demand = % change in quantity demanded / % change in price
Price elasticity of demand = 20% / -20%
Price elasticity of demand = -1
Therefore, the coefficient of price elasticity of demand for this commodity is -1.00, which indicates that the commodity is price elastic.
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The price of a commodity decreases from 10 to 8 and the quantity deman...
We never use negative sign in elasticity of demand... answer will be +1
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The price of a commodity decreases from 10 to 8 and the quantity demanded of it increases from 25 to 30 units, then the coefficient of price elasticity will be______.a)1.00b)-1.00c)1.5d)-1.5Correct answer is option 'B'. Can you explain this answer?
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