Question

Price of a commodity falls from $Rs.4$ and $Rs.3$ per unit. As a result total expenditure on its rises from $Rs.200$ to $Rs.300$.
Find out price elasticity of demand by percentage method.

Answer 1

Price (Rs.)	Total Expenditure (Rs.)	Quantity Demanded (Units)
$4$ $3$	$200$ $300$	$\frac{200}{4}=50$ $\frac{300}{3}=100$

Change in Price	Percentage Change in Price	Change in Demand	Percentage Change in Demand
$Rs.4$ to $Rs.3$	$\frac{3-4}{4}\times 100=-24\%$	$50units$ and $100units$	$\frac{100-50}{50}\times 100=100\%$

Price elasticity of demand $\left(E_d\right)=(-)\frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}}$
$=(-)\frac{100\%}{-25\%}=4$.
Price elasticity of demand $=4$.