Question

price elasticity of demand is -3 . If price rises from RS 10 per unit to Rs 12 per unit , what is percentage change in demand ?

Answer 1

Dear Student,

Given information:

Price Elasticity of Demand = -3
Initial Price (P₀) = Rs 10 per unit
Final Price (P₁) = Rs 12 per unit
$$\begin{gathered} \mathrm{Percentage}\mathrm{change}\mathrm{in}\mathrm{Price}=\frac{P_1-P_0}{P_0}\times 100 \\ =\frac{12-10}{10}\times 100=20 \end{gathered}$$

$$\begin{gathered} \mathrm{Elasticity}\mathrm{of}\mathrm{Demand}=(-)\frac{\%\mathrm{Change}\mathrm{in}\mathrm{Quantity}\mathrm{Demanded}}{\%\mathrm{Change}\mathrm{in}\mathrm{Price}} \\ -3=-\frac{\%\mathrm{Change}\mathrm{in}\mathrm{Quantity}\mathrm{Demanded}}{20} \\ \%\mathrm{Change}\mathrm{in}\mathrm{Quantity}\mathrm{Demanded}=60\% \end{gathered}$$