Question

a. Arrange the following coefficients of price elasticity of demand in ascending order:

-0.7, -0.3, -1.1, -0.8

b. Comment upon the degree of elasticity of demand for Good X, using the total outlay method, if the price of X falls from Rs18 per unit to Rs13 per unit and its quantity demanded rises from 50 units to 100 units.

Answer 1

(a) Ascending order: -0.3, -0.7, -0.8, -1.1.

(minus sign only represents the inverse relation between price and quantity demanded)

(b)

$\begin{array}{ccc}\text{Price (in Rs.)}& \text{Quantity (in units)}& \text{Total outlay (in Rs.)}\\ 18& 50& \\ 13& 100& \end{array}$

CONCLUSION: The given data shows an inverse relation between $P_x$ and Total outlay, thus as per the total expenditure method, Ed > 1.