When the price of goods rises from Rs.10 per unit to Rs.12 per unit, its quantity demanded falls by 20 percent.

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When the price of goods rises 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 ?


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Salim Ahmed Kawsar

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Given.

Percentage fall in demand = 20

Initial Price= Rs.10

New Price =Rs.12

% Increase in Price=2/10x100=20%

We know,

Ed=% Change in Denrand / % Change in Price

=-20/20=-1

Now, if price rises from 10 to 13

% Change in Price =3/10x100=30%

So,

% Change in Demand = % Change in Price x Ed = 30 x-1 =- 30

So, we can say that if the price rises from Rs.10 to Rs.13, i.e.by 30%, then the demand will fall by 30%. This is because the goods follows unitary elasticity,.

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