Question

The price elasticity of demand when fresh milk's price increases from $Rs.20$ per litre to $Rs.30$ per litre is equal to

• A. $2.5$
• B. $1.0$
• C. $1.66$
• D. $2.66$

Answer 1

Answer: (B)

$1.0$

Arc elasticity method
$=\frac{400-200}{30-20}\times \frac{(20+30)}{(400+200)}$
$=\frac{200}{10}\times \frac{50}{600}=1.66$.