Question

The demand by a consumer for a commodity declines by $10$ per cent when its price increases from $Rs.5$ to $Rs.6$ per unit. What is the price elasticity of demand of th commodity?

Answer 1

Percentage change in price $=\frac{△P}{P}\times 100=\frac{6-5}{5}\times 100=\frac{1}{5}\times 100=20\%$
Percentage change in quantity demanded $=(-)=10\%$
Price elasticity of demand $\left(E_d\right)=(-)\frac{\text{Percentage change in quantity demanded}}{\text{Percentage change in price}}$
$=(-)\frac{-10\%}{20\%}=0.5$
Price elasticity of demand $=0.5$.