MODEL TEST PAPER PART 1
PAPER 3 Q143The cross elasticity of monthly demand for refills when the price of gel pen increse from Rs10 to Rs15 is equal to:
a minus0.71 b0.25 c minus 0.1 d 0.38
4 Replies
Tejaswi Kasturi
(student-cpt)
(427 Points)
Replied 30 May 2012
((150-200)/(150+200))*((10+15)/(15-10)) = -5/7 = -0.714 so a is the answer cross elasticity = change in quantity demanded n percentage / change in price in percentage
JOHAN
(CA-FINAL)
(277 Points)
Replied 30 May 2012
what abt Q142 The Ed when gel pens price increases from Rs10 to Rs15 per pen is equal to;
a 2.5 b 1 c 1.66 d 2.66
i am gettin the ans as 0.5 Ed
Tejaswi Kasturi
(student-cpt)
(427 Points)
Replied 30 May 2012
they decrease from 120 to 60 so ((60-120)/(120+60))/((15-10)/(15+10)) = ((-60)/(180))*(25/5) = -5/3 = -1.67 but when writing price elasticity of demand we ignore the negative sign as convention. so answer is c
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