Advertisements
Advertisements
Question
When the price of a good falls from Rs 10 to Rs 8 per unit, its demand rises from 20 units to 24 units. What can you say about price elasticity of demand of the good through the expenditure approach?
Solution
Given that
`Q_1 = 20`
`Q_2 = 24`
`P_1 = Rs 10`
`P_2 = Rs 8`
Total initial expenditure = `Q_1 xx P_1 = 10 xx 2 = Rs 200`
Total newexpenditure = `Q_2 xx P_2 = 8 xx 24 = Rs 192`
Since, the total expenditure is falling with a decrease in the price of the commodity, the price elasticity of demand for the good is less than 1.
APPEARS IN
RELATED QUESTIONS
When the price of good rise from Rs 10 per unit to Rs 12 per unit, its quantity demanded falls by 20 percent. Calculate its price elasticity of demand. How much would be the percentage change in its quantity demanded, if the price rises from Rs 10 per unit to Rs 13 per unit?
A consumer spends Rs 1000 on a good priced at Rs 8 per unit. When price rises by 25 percent, the consumer continues to spend Rs 1000 on the good. Calculate the price elasticity of demand by percentage method.
A consumer spends Rs 100 on a good priced at Rs 4 per unit. When price rises by 50 percent, the consumer continues to spend Rs 100 on the good. Calculate the price elasticity of demand by percentage method
When the price of good rises from Rs10 to Rs12 per unit, its demand falls from 25 units to 20 units. What can you say about price elasticity of demand of the good through the 'expenditure approach'?
Price elasticity of demand of a good is (-) 1. Calculate the percentage change in price that will raise the demand from 20 units to 30 units.
Discuss any four factors affecting price elasticity of demand.
A consumer buys 10 units of a commodity at a price of Rs. 10 per unit. He incurs an expenditure of Rs 200 on buying 20 units. Calculate price elasticity of demand by the percentage method. Comment upon the shape of demand curve based on this information.
State whether the following statements are TRUE or FALSE :
The demand of foodgrains is inelastic.
Fill in the blanks with appropriate alternatives given in the bracket.
Demand elasticity can be measured from demand curve by ___________ method.
What do you mean by an ‘inferior good’? Give some examples.
Give reason or explain the following statement:
Demand for necessaries is inelastic.
State whether the following statement is true or false. Give valid reasons in support of your answer.
The coefficient of price elasticity of demand for the commodity is inversely related to the number of alternative uses of the commodity.
If quantity supplied increases by 60% due to a 50% increase in price, then elasticity of supply is ______
If a good takes up a significant share of consumers' budget, its demand will be ______.
Elasticity of the demand is available when:
Identify the correctly matched pair from the items in Column A by matching them to the items in column B:
| Column A | Column B |
| 1. Increase or decrease in demand for a commodity does not cause any change in its price. | (a) Effect on supply, in the case of Perfectly Elastic Demand. |
| 2. Increase or decrease in demand causes a change in the price of the commodity. Equilibrium quantity remains constant. | (b) Effect on demand, in the case of Perfectly Inelastic Supply. |
| 3. Increase or decrease in demand cause a change in the price of the commodity. Equilibrium quantity remains constant. | (c) Effect on demand, in the case of Perfectly Elastic Supply. |
| 4. Increase or decrease in demand for a commodity does not cause any change in its price. | (d) Effect on supply, in the case of Perfectly Elastic Demand. |
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.
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.
Price elasticity of demand is defined as the percentage change in the quantity demanded of a commodity divided by the percentage change in the price of that commodity.
