In four separate observations, price rises by 10% and quantity demanded falls by the following percentages, other relevant factors being held constant:
(A) 20%
(B) 8%
(C) 2%
(D) 14%
Using the absolute percentage-change ratio, arrange A–D in increasing order of price elasticity of demand.
(C), (B), (D) and (A)
Divide the absolute percentage change in quantity by the 10% price change. The elasticities are A = 2, B = 0.8, C = 0.2 and D = 1.4. Hence the increasing order is C, B, D, A. Product labels alone would not establish such a universal ranking.
Important Questions from The elasticity of demand and its measurement
When the price increase of a commodity is followed by increased total revenue, which one of the following is the price elasticity coefficient?
Which factor is mainly responsible for increase in demand of natural resources?
When the price of a good falls from Rs. 20 per unit to Rs. 15 per unit, its demand rises by 25 percent. Calculate the price elasticity of demand. (by percentage method)
The interest elasticity of demand for money in liquidity trap is:
What is the value of price elasticity of demand for the rectangular hyperbola demand curve ?
