Question : If the price of an article decreases from Rs. 80 to Rs. 60, the quantity demanded increases from 600 to 750 units. Find the point elasticity of demand.
Option 1: -1
Option 2: 1
Option 3: -1.25
Option 4: 1.25
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Correct Answer: -1
Solution : The answer is ( -1 ).
To determine the point elasticity of demand , we can use the following formula:
Point Elasticity of Demand (PED) = (%Change in Quantity Demanded)/(%Change in Price) Percentage Change in Quantity Demanded:
= [(New Quantity Demanded - Old Quantity Demanded)/Old Quantity Demanded] * 100
= [(750 - 600) / 600] * 100
= (150 / 600) * 100
= 25%
Percentage Change in Price:
= [(New Price - Old Price) / Old Price] * 100
= [(60 - 80) / 80] * 100
= (-20 / 80) * 100
= -25%;
Now, plug these values into the formula for PED: PED = (25%)/(-25%)
PED = -1;
So, the point elasticity of demand for this article is -1.
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