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Consider the demand for good. At price â...

Consider the demand for good. At price ₹ 4, the demand for the good is 25 units. Suppose price of the good increases to ₹5, the demand falls to 20 units. Calculate price elasticity.

Text Solution

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The correct Answer is:
P=4 Q= 25
`P_(1) = 5 Q_(1)= 20`
` DeltaP= P_(1)- P = 1 " " DeltaQ = Q_(1)-Q =-5`
` P.e_(D) = P/Qxx(DeltaQ)/(DeltaP)`
` = 4/25xx(-5)/1 = (-4)/5 = (-) 0.8`
`|P.e_(D)|= 0.8, 0.8 lt 1 `
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