SELECT * FROM question_mgmt as q WHERE id=10231 AND status=1 SELECT id,question_no,question,chapter FROM question_mgmt as q WHERE courseId=3 AND subId=60 AND chapterId=609 and ex_no='1' AND status=1 ORDER BY CAST(question_no AS UNSIGNED) CBSE Free NCERT Solution of 12th micro-economics Theory of Consumer Behaviour suppose there was a 4 decrease in the price of a

Question:

Suppose there was a 4 % decrease in the price of a good, and as a result, the expenditure on the good increased by 2 %. What can you say about the elasticity of demand?

Answer:

Percentage decrease in price = 4%
Increase in expenditure = 2%
∆E = ∆P{ q(1 ed )}
Since the price has decreased, the expenditure on the good will increase. This implies that the percentage of change in demand has increased more than the percentage decrease in price. The numerator is more than the denominator. This means that elasticity is more than
1. We can say that the small change in price has led to a bigger change in demand, and as a result, the demand is elastic.


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