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600 units of a good are demand at ₹ 8 ...

600 units of a good are demand at ₹ 8 per units. Its price falls by 25% and quantity demanded rises by 120 units. Calculate `P.e_(D)`. It its demand elastic ?

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` P_(1)= ₹8- (25% of 8) = ₹ 8-₹2=₹6`
` Q_(1)= 600 + 120 = 720 "units" `
` P =8, P_(1)= 6, DeltaP= -2`
` Q=600, Q_(1)= 720, DeltaQ= 120 `
` P.e_(D)= P/Q xx (DeltaQ)/ (DeltaP)= 8/600xx120/ (-2)= (-)0.8 or |P.e_(D)|= 0.8 lt 1 `
Demand of the good is less elastic as `e_(D)` is less than one.
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