The qunantity demanded of a commodity at a price of ₹ 8 per unit is 600 units. Its price falls by 25 per cent and the quantity demanded rises by 120 units. Calculate the price elasticity of demand . Is its demand elastic ? Give reason for your answer.

Answer

`E_(d) = (-) 0.8` (Demand is unitary elastic because `E_(d) lt 1)`
Negative sign of `E_(d)` indicates the inverse relationship between price and quantity demanded.

Explanation

percentage change in demand = `(Delta Q)/Q xx 100 =120/600 x100 =20% `
Price Elasticity of demand `(E_(d)) = (" Percentage change in Quantity demanded")/("percantage change in price") =(-20%)/(25%)`
Price Elasticity of Demand `(E_(d)) = (-) 0.8`