A consumer spends ₹1000 on a good priced at ₹ 10 per unit. When its price falls by 20 percent the consumer spends ₹ 800 on the good. Calculate price elasticity of demand by the percentage method.

Explanation

`{:(P" " 10),(P_(1)" "8),(overlineunderline(DeltaP-2)):}" "{:(Q" "100),(Q_(1)" "100),(overlineunderline(DeltaQ" "0)):}`
`P.e_(D)= P/Qxx(DeltaQ)/(DeltaP)= 10/100xx0/(-2)`
`P.e_(D)=0`
Since `P.e_(D)` is zero, demand of the good is perfectly inelastic.