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प्रश्न
When the price of a good falls from Rs 10 to Rs 8 per unit, its demand rises from 20 units to 24 units. What can you say about price elasticity of demand of the good through the expenditure approach?
उत्तर
Given that
`Q_1 = 20`
`Q_2 = 24`
`P_1 = Rs 10`
`P_2 = Rs 8`
Total initial expenditure = `Q_1 xx P_1 = 10 xx 2 = Rs 200`
Total newexpenditure = `Q_2 xx P_2 = 8 xx 24 = Rs 192`
Since, the total expenditure is falling with a decrease in the price of the commodity, the price elasticity of demand for the good is less than 1.
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