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Question
Write Short note on the following.
Ratio method of measuring price elasticity of demand ?
Solution
(i) Dr. Alfred Marshall, developed the Proportionate method of measuring price elasticity of demand. It is also known as ratio method or arithmetic method or percentage method of measuring price elasticity of demand.
(ii) Formula:
Ep = (Proportionate change in the quantity demanded ) ÷ (Proportionate change in the price)
(iii) Symbolical form of proportionate method of measuring elasticity of demand.
Ep = [(∆Q) × P] ÷ [(∆P) × Q]
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