Consider the demand for a good. At price Rs 4, the demand for the good is 25 units. Suppose the price of the good increases to Rs 5, and as a result, the demand for the good falls to 20 units. Calculate the price elasticity.

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Solution

P₁ = 4

P₂ = 5

ΔP = P₂ − P₁

= 5 − 4

= 1

Q₁ = 25

Q₂ = 20

ΔQ = Q₂ − Q₁

= 20 − 25

= −5

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Consider the demand for a good. At price Rs 4, the demand for the good is 25 units. Suppose the price of the good increases to Rs 5, and as a result, the demand for the good falls to 20 units. Calculate the price elasticity.

P1 = 4 P2 = 5 ΔP = P2 − P1 = 5 − 4 = 1 Q1 = 25 Q2 = 20 ΔQ = Q2 − Q1 = 20 − 25 = −5

P₁ = 4

P₂ = 5

ΔP = P₂ − P₁

= 5 − 4

= 1

Q₁ = 25

Q₂ = 20

ΔQ = Q₂ − Q₁

= 20 − 25

= −5