Advertisements
Advertisements
प्रश्न
A consumer spends Rs 100 on a good priced at Rs 4 per unit. When its price falls by 25 percent, the consumer spends Rs 75 on the good. Calculate the price elasticity of demand by the Percentage method.
उत्तर
Given:
Actual Total Expenditure (TE0) Rs 100
Change in Total Expenditure (TE1) Rs 75
Actual Price (P0) Rs 4
Percentage change in price - -25
Percentage change in price = `(P_1 - P_0)/P_0 xx 100`
`= -25 = (P_1 - 4)/4 xx 100`
`(-100)/100 = P_1 - 4`
`P_1 = 3`
Therefore,
| Price (P) |
Total Expenditure (TE) = Price (P) × Quantity (Q | Quantity (Q) = `"TE"/P` |
| P0 = Rs = 4 | TE0 = Rs 100 | Q0 = 2 |
| P1 = Rs 3 | TE1 = Rs 75 | Q1= 25 |
`Ed = (-) "Percentage change in quantity demanded"/"Percentage change in price"`
`Ed = (-) ("Changeindemand"/"Actualdemand"xx100)/-25`
Ed = (-) `((Q_1 - Q_0)/Q_0 xx 100)/-25`
`Ed = (-) ((25 - 25)/25 xx 100)/-25`
`Ed = (-) (-20)/25`
∴ Ed = 0
Thus, the price elasticity of demand is 0.
APPEARS IN
संबंधित प्रश्न
The price elasticity of demand for a good is - 0.4. If its price increases by 5 percent, by what percentage will its demand fall? Calculate.
When the price of good rises from Rs10 to Rs12 per unit, its demand falls from 25 units to 20 units. What can you say about price elasticity of demand of the good through the 'expenditure approach'?
A consumer buys 27 units of a good at a price of Rs 10 per unit. When the price falls to Rs 9 per unit, the demand rises to 30 units. What can you say about price elasticity of demand of the good through the 'expenditure approach'?
A consumer spends Rs 400 on a good priced at Rs 4 per unit. When the price rises by 25 percent, the consumer continues to spend Rs 400. Calculate the price elasticity of demand by percentage method.
8 units of a good are demanded at a price of Rs 7 per unit. Price elasticity of demand is (−) 1. How many units will be demanded if the price rises to Rs 8 per unit? Use expenditure approach of price elasticity of demand to answer this question.
Define or explain the following concept.
Unitary elastic demand.
Consider the demand for a good. At price Rs 4, the demand for the good is 25 units. Suppose the price of the good increases to Rs 5, and as a result, the demand for the good falls to 20 units. Calculate the price elasticity.
Give reason or explain the following statement.
All desires are not demand.
Fill in the blank with appropriate alternatives given below:
Perfectly elastic demand curve is ________________.
State whether the following statement is TRUE and FALSE.
Unitary Elastic Demand rarely occurs in practice.
Define or explain the following concept:
Income Elasticity of Demand
Answer the following question.
Draw diagrams to show the elasticity of demand when it is:
(i) Greater than one
(ii) Less than one
(iii) Unity
State whether the following statement is true or false. Give valid reasons in support of your answer.
The coefficient of price elasticity of demand for the commodity is inversely related to the number of alternative uses of the commodity.
State whether the following statement is true or false. Give valid reasons in support of your answer.
Luxury goods often have lower price elasticity of demand.
Arrange the following coefficients of price elasticity of demand in ascending order:
(−) 3.1, (−) 0.2, (−) 1.1
Elasticity of the demand is available when:
Assertion (A): The elastic demand curve for luxuries is flatter than normal.
Reason (R): The coefficient of Elasticity ranges between 0 and 1.
State with reasons whether you agree or disagree with the following statement:
The elasticity of demand gets influenced by the nature of the commodity.
- Luxuries goods have generally elastic demand.
- Goods whose close substitutes are available have inelastic demand.
