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Theory Of Consumer Behaviour

Question

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When price of a good falls by 10 per cent, its quantity demanded rises from 40 units to 50 units. Calculate price elasticity of demand by percentage method.

Solution

Percent rise in demand $equals fraction numerator 10 left parenthesis equals 50 minus 40 right parenthesis over denominator 40 end fraction cross times 100 equals 25$
$eD equals fraction numerator % Change space in space demand space over denominator % space Chanege space in space price end fraction equals 25 over 100 equals 0.25$

Some More Questions From Theory Of Consumer Behaviour Chapter

Starting from an initial situation of consumer's equilibrium, suppose that marginal utility of a rupee increases. Will it increase or decrease the quantity demanded of the product?

What are two approaches to attain the state of consumer's equilibrium?

Define indifference curve.

What is meant by marginal rate of substitution (MRS)?

Why is MRS always diminishing?

When does a consumer attain equilibrium according to indifference curve approach?

Give meaning of demand.

Name two determinants of demand.

List the factors that cause changes in demand.

What is law of demand?

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