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When the price of a product increases by 20%, the demand for the product decreases for 800 to 600. What is the price elasticity of demand for the product?
a. 1
b. 1.25
c. 1.5
d. 1.75
Ans - b
Solution :
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
% Change in Quantity Demanded = 200/800*100 = 25
% Change in Price = 20
Price Elasticity of Demand = 25/20 = 1.25
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At Rs. 20 demand for sugar is 300 Kg. When the price falls to Rs. 18, the demand increases to 390 Kg. The price elasticity of demand of sugar is ......
a. 2
b. 2.5
c. 3
d. 3.5
Ans - c
Solution :
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
% Change in Quantity Demanded = 90/300*100 = 30
% Change in Price = 2/20*100 = 10
Price Elasticity of Demand = 30/10 = 3
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When pizza prices rise 40%, the quantity of pizzas supplied rises by 26%. Calculate the price elasticity of supply.
a. 0.50
b. 0.65
c. 0.75
d. 0.85
Ans - b
Solution :
Price Elasticity of Supply = (% change in quantity supplied. / (% change in price)
= 26/40 = 0.65
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When the price of a commodity falls from Rs. 75 per unit to Rs. 60 per unit, the quantity supplied falls by 40%. 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)
= 40/(75-60)*100/75
= 40/15*100/75
= 40/20
= 2
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When chicken prices rise 40%, the quantity of KFC fried chicken supplied rises by 30%. Calculate the price elasticity of supply.
a. 0.50
b. 0.65
c. 0.75
d. 0.85
Ans - c
Solution :
B is the right ans.
Price Elasticity of Supply = (% change in quantity supplied) / (% change in price)
= 30/40 = 0.75
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