☰
Theory Of Consumer Behaviour
The price elasticity of demand for a good is − 0.4. If its price increases by 5 percentage, by what percentage will its demand fall? Calculate.
Ed = percentage change in quantity demanded / Percentage change in price
Ed = -0.4
% change in price = 5
Hence, -0.4 = percentage change in quantity demanded / 5
Percentage change in quantity demanded = -0.4 * 5 = -2
Thus, when the price of good increase by 5%, the quantity demanded falls by 2%.
Sponsor Area
Sponsor Area
Sponsor Area