What will be elasticity of demand of a commodity when its price rises by 20% and quantity demanded falls from 125 units to 75 units?

$e_d=2$

The correct answer is Option (3) → $e_d=2$

$e_d$= Percentage change in quantity demanded​ / Percentage change in Price

Step 1: Calculate percentage change in quantity demanded

Initial quantity = 125 units
New quantity = 75 units
Change in quantity = 75 - 125 = -50 units

Percentage change in quantity= [(-50)/125] * 100 = - 40%

Step 2: Percentage change in price = +20% (given)

$e_d$= -40 % / 20% = -2

Since elasticity of demand is usually expressed as an absolute value, we get: $e_d$= 2