$Q = 100 - 5P$
What will be the point price elasticity of demand at price ₹ 10 ?
Calculating Point Price Elasticity of Demand
The question asks for the point price elasticity of demand at a specific price point using the given demand function.
Demand Function and Elasticity Formula
The demand function is given as: $Q = 100 - 5P$
The formula for point price elasticity of demand ($E_{pd}$) is:
$E_{pd} = \frac{dQ}{dP} \times \frac{P}{Q}$Step 1: Find the derivative of Quantity (Q) with respect to Price (P)
First, we find the derivative $\frac{dQ}{dP}$ from the demand function:
$ \frac{dQ}{dP} = \frac{d}{dP}(100 - 5P) = -5 $The derivative represents the rate of change of quantity demanded with respect to price.
Step 2: Calculate Quantity (Q) at the given Price (P)
The given price is $P = ₹ 10$. Substitute this into the demand function to find the corresponding quantity $Q$:
$ Q = 100 - 5(10) $ $ Q = 100 - 50 $ $ Q = 50 $Step 3: Calculate the Point Price Elasticity of Demand
Now, substitute the values of $\frac{dQ}{dP}$, $P$, and $Q$ into the elasticity formula:
$ E_{pd} = \left( -5 \right) \times \left( \frac{10}{50} \right) $ $ E_{pd} = -5 \times \frac{1}{5} $ $ E_{pd} = -1 $The point price elasticity of demand is -1. Economists often refer to elasticity in absolute terms. The absolute value is $|E_{pd}| = |-1| = 1$. This indicates unit elasticity at the price of ₹10.
Important Questions from Demand analysis
Sweezy's kinked demand curve model to explain the price and output determination relates to which type of market structure?
Match List I with List II
List I
List II
A.
Snob effect
I.
If firms are disproportionately powerful, the market leader makes the first move and captures two-thirds of the market.
B.
Small-world model
II.
When some people demand a smaller quantity of a commodity as more people consume it, in order to be different and exclusive
C.
Stackelberg model
III.
Oligopolistic firms seek to maximise sales after an adequate rate of profit has been earned to satisfy stockholders.
D.
Sales maximisation model
IV.
Theory that a corporate giant can be made to operate as a small firm by linking well connected individuals from each level of the organisation to one another.
Choose the correct answer from the options given below:
Arrange the following economic identities in a sequential evolution to understand consumer demand.
A. Law of Demand
B. Utility analyses
C. Demand Elasticity analysis
D. Indifference curve analysis
E. Demand Forecasting
Choose the correct answer from the options given below
Which one of the following relationships regarding price elasticity coefficient with changes in price and change in total revenue is incorrect?
From the following determinants of the price elasticity of demand, indicate the correct code for the determinants having a positive relationship with the degree of the price elasticity of demand:
(a) Range of substitutes of the commodity
(b) Extent of the different uses of the commodity
(c) Portion of the income of the buyer spent on the commodity
(d) Income group of buyers purchasing the commodity
