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Question
If the price hike in the market is about 10% and this leads to the fall in the quantity demanded by 12%, calculate the price elasticity of demand. Mention the degree of price elasticity of demand.
Solution
ep = `(% "change in quantity demanded")/(% "change in price")`
= `12/10`
= 1.2
Here ep > 1
Therefore, demand is (relatively) elastic.
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