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CAIIB - ABM- CASE STUDIES / NUMERICAL QUESTIONS

When the price of a commodity falls from Rs. 10 per unit to Rs. 9 per unit, the quantity supplied falls by 20%. Calculate the price elasticity of supply.

a. 1
b. 1.5
c. 2
d. 2.5

Ans - c

Solution :

Price Elasticity of Supply = (% change in quantity supplied. / (% change in price)

= 20/(10-9)*100/10
= 20/1*10
= 20/10
= 2
.............................................

Demand for a product at Rs. 10 per unit is 400. If the price elasticity of demand is 1, how much the demand will be at Rs. 16 per unit?

a. 240
b. 200
c. 160
d. 120

Ans - c

Solution :

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

% Change in Quantity Demanded = 400-x/400*100 = (400-x)/4
% Change in Price = 6/10*100 = 60

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
1 = ((400-x)/4)/60
60 = (400-x)/4
240 = 400-x
x = 400-240
x = 160
.............................................

When the price of a commodity falls from Rs. 40 per unit to Rs. 32 per unit, the quantity supplied falls by 30%. Calculate the price elasticity of supply.

a. 1
b. 1.5
c. 2
d. 2.5

Ans - b

Solution :

Price Elasticity of Supply = (% change in quantity supplied) / (% change in price)
= 30/(40-32)*100/40
= 30/8*100/40
= 30/20
= 1.5
.............................................

When the price of a product increases from 40 to 50, the demand for the product decreases by 25%. What is the price elasticity of demand for the product?

a. 1
b. 1.5
c. 2
d. 2.5

Ans - a

Solution :

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price

% Change in Quantity Demanded = 25
% Change in Price = 10/40*100 = 25

Price Elasticity of Demand = 25/25 = 1

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