Price Elasticity Calculation for Samosa Demand

This question asks for the price elasticity of demand (PED) based on changes in consumption due to price changes. PED measures how sensitive the quantity demanded of a good is to a change in its price.

Price Elasticity of Demand Formula

The formula for Price Elasticity of Demand is:

$ PED = \frac{\% \text{ Change in Quantity Demanded}}{\% \text{ Change in Price}} $

Where:

• $ \% \text{ Change in Quantity Demanded} = \frac{Q_2 - Q_1}{Q_1} \times 100 $
• $ \% \text{ Change in Price} = \frac{P_2 - P_1}{P_1} \times 100 $

Here, $Q_1$ and $P_1$ are the initial quantity and price, and $Q_2$ and $P_2$ are the new quantity and price.

Applying the Formula to Kumar's Samosa Consumption

Given Data:

• Initial Price ($P_1$): ₹12
• Initial Quantity ($Q_1$): 30 samosas
• New Price ($P_2$): ₹15
• New Quantity ($Q_2$): 20 samosas

Calculating Percentage Changes

1. % Change in Quantity Demanded: $ \% \Delta Q = \frac{20 - 30}{30} \times 100 = \frac{-10}{30} \times 100 = -\frac{1}{3} \times 100 \approx -33.33\% $
2. % Change in Price: $ \% \Delta P = \frac{15 - 12}{12} \times 100 = \frac{3}{12} \times 100 = \frac{1}{4} \times 100 = 25\% $

Calculating Price Elasticity of Demand (PED)

Now, substitute the percentage changes into the PED formula:

$ PED = \frac{-33.33\%}{25\%} \approx -1.33 $

The price elasticity of demand is approximately -1.33. Often, elasticity is discussed in absolute terms. The absolute value is $|-1.33| = 1.33$. This indicates that demand is elastic, meaning the percentage change in quantity demanded is greater than the percentage change in price.

Final Answer Determination

The calculated price elasticity of demand is approximately 1.33.