Question : When the price of a good increases by 10%, and the quantity demanded decreases by 5%, what is the price elasticity of demand?
Option 1: 0.2
Option 2: 0.5
Option 3: 1.0
Option 4: 2.0
Correct Answer: 0.5
Solution : The correct answer is (b) 0.5
The price elasticity of demand can be calculated using the formula:
Price Elasticity of Demand = (% Change in Quantity Demanded) / (% Change in Price)
In this case, the price increases by 10% and the quantity demanded decreases by 5%. Plugging these values into the formula, we get
Price Elasticity of Demand = (-5%) / (10%) = -0.5
The negative sign indicates that the demand is price inelastic. However, the question asks for the absolute value.
Question : The quantity demanded of a good decreases from 200 units to 160 units when the price increases from INR 20 to INR 25 per unit. Calculate the price elasticity of demand.
Question : The quantity demanded of a good decreases from 400 units to 300 units when the price increases from INR 20 to INR 30 per unit. Calculate the price elasticity of demand.
Question : If the price elasticity of demand for a good is -0.5, then a 10% increase in price will result in a:
Question : The quantity demanded of a good increases from 500 units to 600 units when the price decreases from INR 10 to INR 8 per unit. Calculate the price elasticity of demand.
Question : If the price of a product increases from INR 50 to INR 60 per unit, and the quantity demanded decreases from 100 units to 80 units, calculate the price elasticity of demand.
Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile