A consumer spends Rs. 80 on a commodity when price is Rs. 1 per unit. If the price increases by Rs. 1, his expenditure becomes Rs. 96. Comment on PED.

Explanation

`{:("Initial Price (P) = 1","Initial Expenditure = 80","Initial DD (Q)"(80)/(1)=80),("New Price "(P_(1))=2,"New Expenditure = 96","New DD "(Q_(1))=(96)/(2)=48),(Delta P=1,,Delta Q=-32):}`
`PED=(Delta Q)/(Delta P)xx(P)/(Q)=([-]32)/(1)xx(1)/(80)=[-](4)/(10)=[-]0.4`
Negative Sign of ED indicates the inverse relationship between price and quantity demanded.
PED = 0.4 [Less than unitary elastic demand or inelastic demad]