A 5 % fall in the price of x leads to 10 % rise in the demand for x . A 20 % rise in the price of y leads to 6 % fall in the demand for y. Calculate the price elasticities of demand of x and y. out of x and y, which commondity is more elastic ?

Answer

price Elasticity of x = (-) 2; price Elasticity of y = (-) 0.3; is more elastic as compared to commodity y.
Negative sign of `E_(d)` indicates the inverse relastionship between price and quantity demanded.

Explanation

Price Elasticity of Demand for 'x'
Price Elasticity of Demand `(E_(d)) = (" Percentage change in Quantity demanded")/("percantage change in price") =(10%)/(-5%)`
Price Elasticity of Demand `(E_(d)) = (-) 2`
Price Elasticity of Demand for 'y '
Price Elasticity of Demand `(E_(d)) = (" Percentage change in Quantity demanded")/("percantage change in price") =(-6%)/(20%)`
Price Elasticity of Demand `(E_(d)) = (-) 0.3`