A 5 per cent fall in the price of a good raises its demand from 300 units to 318 units. Calculate its price elasticity of demand.

Explanation

`{:("Original Quantity (Q) = 300 units"," % Change in Price "=-5%),("Change in Quantity "(Delta Q)=18" units"," Elasticity of Demand (ED) = ?"),("New Quantity "(Q_(1))=318" units",):}`
Percentage change in demand
`=(Delta Q)/(Q)xx100=(18)/(318)xx100=6%`
Price Elasticity of Demand (ED)
`=("% Change in quantity demanded")/("% Change in price")`
`=(6%)/(-5%)`
Price Elasticity of Demand `(ED)=(-)1.2`
`ED=(-)1.2`, Demand in more elastic because ED `gt 1`.