Suppose the price elasticity of demand for a good is −0.2. If there is a 5% increase in the price of the good, then by what percentage will the demand for the good go down?

Open in App

Solution

e_d = −0.2 [Note that e_d = −2. Hence, we need not prefix e_d to (−2)]

Percentage change in price = 5%

1.0 ⇒ Percentage change in demand

= 1%

Suggest Corrections

Similar questions

Suppose the price elasticity of demand for a good is - 0.2. How will the expenditure on the good be affected if there is a $10 %$ increase in the price of the good?

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

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.

Q. Consider the demand for a good. At price, Rs. 4, the demanded for the goods is 25 units. Suppose 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.

Q. If the price elasticity of demand for a good is 0.70, the demand for the good can be described as _________.

Join BYJU'S Learning Program

Suppose the price elasticity of demand for a good is −0.2. If there is a 5% increase in the price of the good, then by what percentage will the demand for the good go down?

ed = −0.2 [Note that ed = −2. Hence, we need not prefix ed to (−2)] Percentage change in price = 5% 1.0 ⇒ Percentage change in demand = 1%

e_d = −0.2 [Note that e_d = −2. Hence, we need not prefix e_d to (−2)]

Percentage change in price = 5%

1.0 ⇒ Percentage change in demand

= 1%