Question

a. Arrange the following coefficients of price elasticity of demand in ascending order:
-0.87, -0.53, -3.1, -0.80

b. Comment upon the degree of elasticity of demand for commodity X, if the price of the commodity falls from Rs 28 per unit to Rs 23 per unit and its quantity demanded rises from 50 units to 100 units.

Answer 1

a) -0.53, -0.80, -0.87,- 3.1 (minus sign only represents the inverse relation between price and quantity demanded)

b) $\begin{array}{cc}\text{Price (in Rs)}& \text{Quantity (in units)}\\ \text{Original = 28}& \text{Original = 50}\\ \text{New = 23}& \text{New = 100}\end{array}$
$Ed=\frac{\text{Change in Quantity Demanded}}{\text{Change in Price}}\times \frac{\text{Original Price}}{\text{Original Quantity}}$ (Absolute values taken)
$=\frac{50}{5}\times \frac{28}{50}$
= 5.6 (Ed > 1, relatively more elastic demand.)