17 Views

Question : The quantity demanded of a good decreases from 400 units to 300 units when the price increases from INR 20 to INR 30 per unit. Calculate the price elasticity of demand.

Option 1: -0.5

Option 2: -1.0

Option 3: -1.5

Option 4: -2.0


Team Careers360 9th Jan, 2024
Answer (1)
Team Careers360 19th Jan, 2024

Correct Answer: -1.0


Solution : The correct answer is (b) -1.0.

Percentage change in quantity demanded = (300 - 400) / 400 * 100% = -25%

Percentage change in price = (30 - 20) / 20 * 100% = 50%

Price elasticity of demand = -25 / 50 = -1.0

A price elasticity of demand of -1.0 means that a 1% increase in price leads to a 1% decrease in quantity demanded. In this case, a 50% increase in price leads to a 25% decrease in quantity demanded. This suggests that demand for this good is relatively elastic, meaning that consumers are sensitive to changes in price.

Related Questions

UPES B.Tech Admissions 2026
Apply
Ranked #43 among Engineering colleges in India by NIRF | Highest Package 1.3 CR , 100% Placements
UPES Integrated LLB Admission...
Apply
Ranked #18 amongst Institutions in India by NIRF | Ranked #1 in India for Academic Reputation by QS Rankings | 16 LPA Highest CTC
Nirma University Law Admissio...
Apply
Grade 'A+' accredited by NAAC | Ranked 33rd by NIRF 2025
UPES M.Tech Admissions 2026
Apply
Ranked #45 Among Universities in India by NIRF | 1950+ Students Placed 91% Placement, 800+ Recruiters
UPES | BBA Admissions 2026
Apply
#36 in NIRF, NAAC ‘A’ Grade | 100% Placement, up to 30% meritorious scholarships
IMT Ghaziabad PGDM Admissions...
Apply
AACSB, NBA & SAQS Accredited | H-CTC 41.55 LPA | Merit Based Scholarship
View All Application Forms

Download the Careers360 App on your Android phone

Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile

150M+ Students
30,000+ Colleges
500+ Exams
1500+ E-books