Comment upon the degree of elasticty of demand for Good X, in the following given situation, if the price of the commodity rises from ₹5 per unit to ₹ 7 per unit and the quantity demand falls from 20 units to 16 units using proportionate method.

Explanation

(i) `{:("Price (Rs.)","Quantity (in units)","Total Expenditure in Rs."("Price"xx"Quantity")),(" 5"," 20"," 100"),(" 7"," 16"," 112"):}`
So, above table shows positive relationship between price and total expenditure, which shows Inelastic Demand `(ED lt 1)`.
(ii) `{:("Initial Price (P) = 5","Initial Quantity (Q) = 20"),("New Price "(P_(1))=7,"New Quantity "(Q_(1))=16),("Change in price "(Delta P)=2,"Change in Quantity "(Delta Q)=(-)4):}`
Price Elasticity of demand `(ED)=(Delta Q)/(Delta P)xx(P)/(Q)`
`=(-4)/(2)xx(5)/(20)`
`=(-)0.5` [Negative sign of ED indicates the Inverse relationship between price and Quantity demanded]
ED = 0.5 [ED `lt 1` (Inelastic Demand)].