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For a commodity change in price /initial price=(-)0.2 and elasticity of demand =(-)0.3 the percentage change in quantity demanded is?
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For a commodity change in price /initial price=(-)0.2 and elasticity o...
Percentage Change in Quantity Demanded
To calculate the percentage change in quantity demanded, we need to consider the price elasticity of demand and the change in price.
Price Elasticity of Demand
The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
In this case, the elasticity of demand is given as -0.3. The negative sign indicates that the demand is elastic, meaning that the quantity demanded is sensitive to changes in price.
Change in Price
The change in price is given as -0.2. Again, the negative sign indicates a decrease in price.
Calculating the Percentage Change in Quantity Demanded
To find the percentage change in quantity demanded, we can rearrange the elasticity formula:
Percentage Change in Quantity Demanded = Elasticity of Demand * Percentage Change in Price
Substituting the given values:
Percentage Change in Quantity Demanded = (-0.3) * (-0.2)
Percentage Change in Quantity Demanded = 0.06
Therefore, the percentage change in quantity demanded is 0.06, or 6%.
Explanation
The positive percentage change in quantity demanded indicates an increase in the quantity demanded. In this case, a 6% increase in quantity demanded is expected in response to a 20% decrease in price.
The negative price elasticity of demand (-0.3) indicates that the commodity is price-sensitive. A change in price will have a relatively larger impact on the quantity demanded. In this case, a 20% decrease in price leads to a 6% increase in quantity demanded.
This information can be useful for businesses in determining the optimal pricing strategy for their commodities. By understanding the price elasticity of demand, they can estimate the potential impact on quantity demanded when making pricing decisions.
To calculate the percentage change in quantity demanded, we need to consider the price elasticity of demand and the change in price.
Price Elasticity of Demand
The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
Elasticity of Demand = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
In this case, the elasticity of demand is given as -0.3. The negative sign indicates that the demand is elastic, meaning that the quantity demanded is sensitive to changes in price.
Change in Price
The change in price is given as -0.2. Again, the negative sign indicates a decrease in price.
Calculating the Percentage Change in Quantity Demanded
To find the percentage change in quantity demanded, we can rearrange the elasticity formula:
Percentage Change in Quantity Demanded = Elasticity of Demand * Percentage Change in Price
Substituting the given values:
Percentage Change in Quantity Demanded = (-0.3) * (-0.2)
Percentage Change in Quantity Demanded = 0.06
Therefore, the percentage change in quantity demanded is 0.06, or 6%.
Explanation
The positive percentage change in quantity demanded indicates an increase in the quantity demanded. In this case, a 6% increase in quantity demanded is expected in response to a 20% decrease in price.
The negative price elasticity of demand (-0.3) indicates that the commodity is price-sensitive. A change in price will have a relatively larger impact on the quantity demanded. In this case, a 20% decrease in price leads to a 6% increase in quantity demanded.
This information can be useful for businesses in determining the optimal pricing strategy for their commodities. By understanding the price elasticity of demand, they can estimate the potential impact on quantity demanded when making pricing decisions.
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For a commodity change in price /initial price=(-)0.2 and elasticity of demand =(-)0.3 the percentage change in quantity demanded is? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about For a commodity change in price /initial price=(-)0.2 and elasticity of demand =(-)0.3 the percentage change in quantity demanded is? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for For a commodity change in price /initial price=(-)0.2 and elasticity of demand =(-)0.3 the percentage change in quantity demanded is?.
For a commodity change in price /initial price=(-)0.2 and elasticity of demand =(-)0.3 the percentage change in quantity demanded is? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about For a commodity change in price /initial price=(-)0.2 and elasticity of demand =(-)0.3 the percentage change in quantity demanded is? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for For a commodity change in price /initial price=(-)0.2 and elasticity of demand =(-)0.3 the percentage change in quantity demanded is?.
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