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Question:

When the price of a good rises from Rs. 10 per unit to Rs. 12 per unit, its quantity demanded falls by 20 percent. Calculate its price elasticity of demand. How much will be the percentage change in its quantity demanded if the price rises from Rs. 10 per unit to Rs. 13 per unit?

Solution:

We are given,
Percentage fall in demand = 20%
Initial Price = Rs. 10
New Price = Rs. 12
Percentage change in price = [(12 - 10) / 10] * 100 = 20%
Price elasticity of demand (PED) = (% change in quantity demanded) / (% change in price)
PED = -20% / 20% = -1

Now, let's calculate the percentage change in quantity demanded if the price rises from Rs. 10 to Rs. 13.
Percentage change in price = [(13 - 10) / 10] * 100 = 30%
Since the PED is -1, we can use the formula:
PED = (% change in quantity demanded) / (% change in price)
-1 = (% change in quantity demanded) / 30%
% change in quantity demanded = -1 * 30% = -30%
Therefore, if the price rises from Rs. 10 per unit to Rs. 13 per unit, the percentage change in quantity demanded will be -30%.