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Question
Explain price elasticity of demand.
Solution
Price elasticity of demand is the measure of the degree of responsiveness of the demand for a good to the changes in its price. It is defined as the percentage change in the demand for a good divided by the percentage change in its price.
`e_d = ("Precentage change in the demand for a good ")/("Precentage change in the price of the good ")`
`e_d = (Delta Q)/(Delta P ) xx P/Q`
Where,
ΔQ = Q2 − Q1, change in demand
ΔP = P2 − P1, change in demand
P = Initial price
Q = Initial quantity
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RELATED QUESTIONS
Explain the factors determining the elasticity of demand.
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Demand for goods having snob appeal has elastic demand.
Choose the correct answer from given options.
The expenditure on a good would change in the opposite direction as the price changes only when demand is ______
- Assertion (A): Elasticity of demand explains that one variable is influenced by another variable.
- Reasoning (R): The concept of elasticity of demand indicates the effect of price and changes in other factors on demand.
Study the following table and answer the questions:
| Price of Pen (₹) | Demand for Pen |
| 10 | 500 |
| `square` | 400 |
| 30 | `square` |
| `square` | 200 |
| 50 | `square` |
Questions:
- Complete the above table.
- Which type of relationship is found between the price of a pen and demand for the pen?
Assertion (A) : A change in quantity demanded of one commodity due to a change in the price of other commodity is cross elasticity.
Reasoning (R) : Changes in consumers income leads to a change in the quantity demanded.
mention any two examples of composite demand.
When change in price is greater than the change in quantity demand it is a case of elastic demand.
Define elasticity of demand.
