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At Rs. 75 demand for sugar is 800 Kg. When the price falls to Rs. 60, the demand increases to 1000 Kg. The price elasticity of demand of sugar is ......
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 = 15/75*100 = 20
Price Elasticity of Demand = 25/20 = 1.25
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When chiken prices rise 30%, the quantity of KFC fried chicken supplied rises by 15%. Calculate the price elasticity of supply.
a. 0.50
b. 0.65
c. 0.75
d. 0.85
Ans - a
Solution :
Price Elasticity of Supply = (% change in quantity supplied) / (% change in price)
= 15/30 = 0.5
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Demand for a product at Rs. 25 per unit is 1000. If the price elasticity of demand is 1.5, how much the demand will be at Rs. 40 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 = 1000-x/1000*100 = (1000-x)/10
% Change in Price = 15/25*100 = 60
Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price
1.5 = ((1000-x)/10)/60
90 = (1000-x)/10
900 = 1000-x
x = 1000-900
x = 100
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