The total expenditure on a commodity rises from Rs.100 to Rs.150 as a result of an increase in the price of the commodity from Rs. 10 to Rs.15. Find out the elasticity of demand of this commodity by percentage method.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Zero (0)
Price elasticity of demand measures how strongly buyers respond to a price change: it is the percentage change in quantity demanded divided by the percentage change in price. The quantities are not given here, but expenditure is price times quantity, so each quantity is expenditure divided by price.
Given:
Price, P1 = Rs. 10 and P2 = Rs. 15
Total expenditure, E1 = Rs. 100 and E2 = Rs. 150
Working it out:
Q1 = 100 / 10 = 10 units
Q2 = 150 / 15 = 10 units
Percentage change in quantity = (10 − 10) / 10 × 100 = 0%
Percentage change in price = (15 − 10) / 10 × 100 = 50%
eD = 0 / 50 = 0
Quantity does not change when the price rises, so demand is perfectly inelastic: eD = 0, which is Option (2).
NCERT (2025-26): “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.… …The expenditure on a good is equal to the demand for the good times its price.…” |