Question

Suppose price elasticity of demand for a good is (-)0.2. If there is 5% increase in price of the good, by what percentage will the demand for the good go down?

Solution

eD equals fraction numerator % space Change space in space demand over denominator % space Change space in space price end fraction minus 0.2 equals fraction numerator % space Change space in space demand over denominator 5 end fraction minus 1 space equals space % space Change space in space demand

Demand of the good will go down by 1%.

Some More Questions From Theory Of Consumer Behaviour Chapter

For Daily Free Study Material Join wiredfaculty