A consumer spends ₹ 80 on a commondity when its price is ₹ 1 per unit and spends ₹ 96 when its price is ₹ 2 per unit. Calculate price elasticity of demand for the commodity by the percentage method ?

Answer

`E_(d)= (-) 0.4` (Demand is less elastic as `(E_(d) lt 1)`
Negative sign of `E_(d)` indicates the incerse relationship between price and quantity demanded.

Explanation

Percentage change in demand = `(DeltaQ)/Q xx 100 =-32/80 x100 = -40% `
Percentage change in price = `(DeltaP)/P xx 100 = 1/1 xx 100 = 100 %
price Elasticity of Demand `(E_(d)) = (" Percentage change in Quantity demanded")/("percantage change in price") =(-40%)/(100%)`
Price Elasticity of Demand `(E_(d)) = (-) 0.4`