i want to know whether the answer for the price elasticty of demand question is correct or not. please tell me how
in econoville, there is one grocery shop. it used to sell fresh milk at rs.20 per litre , at which price 400 litres of milk were sold per month . after some time , the price were raised to rs. 30per litre.
only 200 lts of milk is sold
the price elasticty of demand when fresh milk price increases from rs.20 to rs.30 is equal to a)2.5 b)1.0 c)1.66 d)2.66
correct answer is 1.66
| Originally posted by :kumar shan | ||
| " | i want to know whether the answer for the price elasticty of demand question is correct or not. please tell me how in econoville, there is one grocery shop. it used to sell fresh milk at rs.20 per litre , at which price 400 litres of milk were sold per month . after some time , the price were raised to rs. 30per litre. only 200 lts of milk is sold the price elasticty of demand when fresh milk price increases from rs.20 to rs.30 is equal to a)2.5 b)1.0 c)1.66 d)2.66 correct answer is 1.66 |
" |
shud be 1 according to me..
200/600*50/10=1/3*5/1=1.66your answer is correct:)
yeah its 1.66 m sorry.
See..
P= 20 ; Q = 400; P1 = 30 ; Q1 = 200
Change in Price = 10
Change in Quantity = 200
Ed = 200/400 * 20/10 = 1.0
option "b" comes out to be right answer..
can someone give me explanation for answer "1.66" ???
| Originally posted by :Himanshu Bansal | ||
| " | See.. P= 20 ; Q = 400; P1 = 30 ; Q1 = 200 Change in Price = 10 Change in Quantity = 200 Ed = 200/400 * 20/10 = 1.0 option "b" comes out to be right answer.. can someone give me explanation for answer "1.66" ??? |
" |
price elas.= %change in Q demanded / % change in price
% in Q demanded = Change/ Average of Q1 and Q2
200/ 200+400/2 = 66.7%
Similarly do for price.
I think u are not taking the average in the denominator.
for price elasticity one other formula is used..
i.e. (Q1-Q2)/(Q1+Q2) * (P1+P2)/(P1-P2)
in above formula :-
Q1 is original quantity
Q2 is new quantity
P1 is orignal price
P2 in new price
thnx Paras and Pradumn..
CAclubindia
