When price of a commodity X falls by 10 per cent, its demand rises from 150 units to 180 units. Calculate its price elasticity of demand. How much should be the percentage fall in its price so that its demand rises from 150 to 210 units ?
Given that
Percentage fall in price = 10
Initial demand = 150
New demand = 180
% Increase in demand = 30 × 100 = 20%
150
As we know that
ed= % Change in demand = -20 = -2
% Change in price 10
if demand increase from 150 to 210
% Change in demand = 60 × 100 = 40%
150
% Change in price = % Change in demand = 40 = -20
ed 2
Hence, the price will fall by 20% if the demand will increase from 150 to 210.
