With rise in price from ₹ 8 to ₹ 14 , total expenditure on the commodity rises by 40% and becomes ₹1,120. Calculate price elasticity of demand. Also, indicate whether demand. Also, indicate whether demand is elastic or inelastic.

Answer

`E_(d) = (-) 0.267 ( Demand is less elastic as `E_(d) lt 1)`
Given New Expenditure = ₹ 1,120.
Also Given:
x + 40% of x= 1,120
`x + (40x)/100 = 1,120`
140x = 1,12,000
x or Original Expenditure = ₹ 800

Explanation

Price Elasticity of demand `(E_(d)) = ( DeltaQ)/(DeltaP)xxP/Q= (-20)/6 xx8 /100 = (-) 0.267`