If the price of a good increases from ₹20 to ₹25 and the quantity demanded decreases from 100 units to 80 units, calculate the price elasticity of demand.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 0.8
Given:
Initial price = ₹20
New price = ₹25
Initial quantity = 100 units
New quantity = 80 units
Price elasticity of demand (eD) is the percentage change in quantity demanded divided by the percentage change in price:
Percentage change in quantity = \( \displaystyle \frac{80 - 100}{100} \times 100 \) = −20 per cent
Percentage change in price = \( \displaystyle \frac{25 - 20}{20} \times 100 \) = 25 per cent
eD = 20 ÷ 25 = 0.8 (the minus sign is dropped)
NCERT (2026-27): Introductory Microeconomics — Chapter 2: Theory of Consumer Behaviour
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