A consumer buys 14 units of a good at a price of Rs. 8 per unit. At price Rs. 7 per unit he spends Rs. 98 on the good. Calculate price elasticity of demand by the percentage method. Comment upon the shape of demand curve based on this information.

Explanation

`{:("Initial Price (P) = 8","Initial Expenditure = 112","Initial Quantity (Q) = 14"),("New Price "(P_(1))=7,"New Expenditure = 98","New Quantity "(Q_(1))),(,,=("Exp.")/("Price")=(98)/(7)=14),(Delta P=(-)1,,Delta Q=0):}`
`PED=(Delta Q)/(Delta P)xx(P)/(Q)=(0)/((-)1)xx(8)/(14)=0`
ED is perfectly inelastic as quantity demanded does not change at all in response to change in price. Thus, its demand curve will be vertical/parallel to y-axis.