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Suppose price elasticity of demand for a...

Suppose price elasticity of demand for a good is -0.2. if there is 5% increase in price of the good, by what percentage will the demand for the good go down ?

Text Solution

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The correct Answer is:
` P.e_(D) = (% " Change in quantity demanded") / (% " Change in price")`
` (-) 0.2 = ( % " Change in quantity deamanded" ) / (5%) `
= quantity demanded will go down by 1%
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