At a price of Rs. 50 per unit the quantity demanded of a commodity is 1000 units . When its price falls by 10 percent , its quantity demanded rises to 1080 units . Calculate its price elasticity of demand . Is its demand inelastic ? Given reasons for your answer.

Explanation

`E_(P)=(P)/(Q)xx(DeltaQ)/(DeltaP)=(50)/(1000)xx(80)/(-5)=(-)(4)/(5)=(-)0.8`
The demand is inelastic because the absolute value of clasticity is less than 1 (sign ignored).