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Questions
Briefly explain the percentage method of calculating elasticity of demand.
How is the elasticity of demand measured according to the percentage method?
Explain the percentage method of measuring price elasticity of demand.
Solution
According to this method, the price-elasticity of demand is given by the ratio of percentage change in demand to percentage change in price, i.e.
`"Percentage Change in Demand"/"Percentage Change in Price"`
If the value of this ratio is equal to one, then the commodity will be unit elastic.
If the value is less than one, then the commodity will be inelastic and if it is more than one, then the commodity will be elastic.
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