Question

Price elasticity of demand for a good is -0.75. Calculate the percentage fall in its price that will result in a 15 per cent rise in its demand.

Answer 1

Given, $E_d=-0.75$

Percentage change in quantity demanded $=15\%$

Price elasticity of demand.

$\left(E_d\right)=\frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}}$

$=-0.75=\frac{15\%}{\text{Percentage change in price}}$

Percentage change in price $=\frac{15\%}{-0.75}$

Percentage change in price $=-20\%$

Percentage fall in price $=20\%$