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प्रश्न
A consumer spends Rs 400 on a good priced at Rs 8 per unit. When its price rises by 25 percent, the consumer spends Rs 500 on the good. Calculate the price elasticity of demand by the Percentage method.
उत्तर
Given:
Actual Total Expenditure (TE0) = Rs 400
Change Total Expenditure (TE1) = Rs 500
Actual Price (P0) = Rs 8
Percentage change in price = +25
Percentage change in price = `(P_1 - P_0)/P_0 xx 100`
`25 = (P_1 - 8)/8 xx 100`
`200/100 = P-1- 8`
`P_1 = 10`
Therefore,
| Price (P) | Total Expenditure (TE) = Price (P) × Quantity (Q) |
Quantity (Q) = `"TE"/P` |
| P0 = Rs 8 | TE0 = Rs 400 | Q0 = 50 |
| P1 = Rs 10 | TE1 = Rs 5 | Q1= 50 |
herefore,
Ed = (-) `"Percentage change in quantity demanded"/"Percentage change in price"`
Ed = (-) `("Changeindemand"/"Actualdemand" xx 100)/(-25)`
Ed = `((Q_1 -Q_0)/Q_0 xx 100)/(25)`
Ed = (-) `((50 - 50)/50 xx 100)/(25)`
∴ Ed = 0
Thus, the price elasticity of demand is 0
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