Study the table and answer.
| Price per unit (Rs) | Quantity demanded (units) |
|---|---|
| Old price: 8 | Old quantity: 60 |
| New price: 10 | New quantity: 51 |
What is the price elasticity of demand (absolute value), and what is the nature of demand?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 0.6; inelastic
Given:
Old price P1 = Rs 8, new price P2 = Rs 10
Old quantity Q1 = 60, new quantity Q2 = 51
Price elasticity of demand = percentage change in demand ÷ percentage change in price, each change taken on the old value.
% change in quantity = (51 − 60)/60 × 100 = −15
% change in price = (10 − 8)/8 × 100 = 25
|eD| = 15/25 = 0.6
Since 0.6 is less than 1, demand is inelastic.
Option (1) 1.67; elastic — this divides the other way round (25/15).
NCERT (2026-27): “2.6 Elasticity of Demand … Price elasticity of demand is a measure of the responsiveness of the demand for a good to changes in its price. Price elasticity of demand for a good is defined as the percentage change in demand for the good divided by the percentage change in its price. …” “… When the percentage change in quantity demanded is less than the percentage change in market price, eD is estimated to be less than one and the demand for the good is said to be inelastic at that price. Demand for essential goods is often found to be inelastic. …” |