Kumar used to eat 30 samosas in amonth when the price of each samosawas rupees 12. When the price of samosaincreased to 15 per piece, he eatsonly 20 samosas a month. What is theprice elasticity of demand for samosaby Kumar ?(a) 1.33(b) 1.00(c) 0.75(d) 0.08(CAPF AC 2020)
Given : Kumar used to eat 30 samosas in amonth when the price of each samosa was rupees 12. When the price of samosa increased to 15 per piece, he eats only 20 samosas a month.
To Find : What is the price elasticity of demand for samosa by Kumar
(a) 1.33
(b) 1.00
(c) 0.75
(d) 0.08
Solution:
price elasticity of demand = (%change in Qty demanded)/(% change in Price)
Qty earlier demand = 30
Qtly later demand = 20
% change in Qty demanded = (20 – 30)/30 * 100 = -100/3 %
Earlier price = 12
New price = 15
%change in price = ( 15 – 12)/12 * 100 = 25 %
price elasticity of demand = (-100/3) / 25
= -4/3
= -1.33
price elasticity of demand is 1.33
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