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Question
What will be the effect of 10 percent rise in price of a good on its demand if price elasticity of demand is (a) Zero, (b)-1, (c)-2.
Solution
(a) Given that
Ed = 0,Percentage change in price = 10
`E_d="Percentage change in quanitity demanded"/"Percentage change in price"`
`0="Percentage change in quanitity demanded"/10`
Therefore, Percentage change in quanitity demanded = 0
(b) Given that
Ed = -1, Percentage changeinprice=10
`E_d="Percentage change in quanitity demanded"/"Percentage change in price"`
`-1="Percentage change in quanitity demanded"/10`
Therefore,Percentagechangein quanitity demanded = -10
(C) Given that
Ed = -2, Percentage change in price = 10
`E_d="Percentage change in quanitity demanded"/"Percentage change in price"`
`-2="Percentage change in quanitity demanded"/10`
Therefore, Percentage change in quanitity demanded = -20
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