If ratio between the change in price & change in quantity demanded is…

The correct answer is Option (3) → (−) 0.40

Given:

Change in price ÷ change in quantity demanded (ΔP ÷ ΔQ) = 0.25

Initial price (P) = Rs 10

Initial quantity (Q) = 100 units

The price elasticity of demand (e_D) is the percentage change in quantity demanded divided by the percentage change in price. This works out to (ΔQ ÷ ΔP) × (P ÷ Q).

ΔQ ÷ ΔP = 1 ÷ 0.25 = 4

e_D = 4 × (10 ÷ 100) = 0.40

Price and quantity demanded move in opposite directions, so the elasticity carries a minus sign: e_D = (−) 0.40.

Note: Here the “ratio between the change in price and the change in quantity demanded” is taken as change in price divided by change in quantity. This is the usual order of such a ratio. Read the other way round, the same steps give (−) 0.025, which is Option (1).