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प्रश्न
A consumer spends Rs 60 on a good priced at Rs 5 per unit. When price rises by 20 percent, the consumer continues to spend Rs 60 on the good. Calculate the price elasticity of demand by percentage method.
उत्तर
Given that
Actual Total Expenditure (TE0) Rs 60
Final Total Expenditure (TE1) Rs 60
Actual Price (P0) Rs 5
Percentage change in price = -20%
Percentage change in price = `(P_1 - P_0)/P_0 xx 100`
`-20 = (P_1 - 5)/5 xx 100`
`- 100/100 = P_1 - 5`
`P_1 = 4`
| Price (P) | Total Expenditure (TE) = Price (P) × Quantity (Q) | Quantity (Q) = `"TE"/P`` |
| P0 = Rs 5 | TE0 = Rs 60 | Q0 = 1 |
| P1 = Rs 4 | TE1 = Rs 60 | Q1= 15 |
Therefore,
Ed = (-) `"Percentage change in quantity demanded"/"Percentage change in price"`
Ed = (-) `("Changeindemand"/"Actualdemand" xx 100)/(-20)`
Ed = `((Q_1 -Q_0)/Q_0 xx 100)/(-20)`
Ed = (-) `((15 - 12)/12 xx 100)/(-20)`
Ed = (-) `25/(-20)`
∴ Ed 1.25
Thus, the price elasticity of demand is 1.25
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