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economics query

kumar shan (student) (138 Points)

16 November 2009

i want to know whether the answer for the price elasticty of demand question is correct or not. please tell me how

in econoville, there is one grocery shop. it used to sell fresh milk at rs.20 per litre , at which price 400 litres of milk were sold per month . after some time , the price were raised to rs. 30per litre.

only 200 lts of milk is sold

the price elasticty of demand when fresh milk price increases from rs.20 to rs.30 is equal to a)2.5 b)1.0 c)1.66 d)2.66

correct answer is 1.66

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Pradumn Bajaj ( ) (46 Points)
Replied 16 November 2009

Originally posted by :kumar shan
"	i want to know whether the answer for the price elasticty of demand question is correct or not. please tell me how in econoville, there is one grocery shop. it used to sell fresh milk at rs.20 per litre , at which price 400 litres of milk were sold per month . after some time , the price were raised to rs. 30per litre. only 200 lts of milk is sold the price elasticty of demand when fresh milk price increases from rs.20 to rs.30 is equal to a)2.5 b)1.0 c)1.66 d)2.66 correct answer is 1.66	"

shud be 1 according to me..

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nikhil ((CA Final) Article) (363 Points)
Replied 16 November 2009

200/600*50/10=1/3*5/1=1.66your answer is correct:)

Pradumn Bajaj ( ) (46 Points)
Replied 16 November 2009

yeah its 1.66 m sorry.

CA Himanshu Bansal (Risk Manager) (2345 Points)
Replied 16 November 2009

See..

P= 20 ; Q = 400; P1 = 30 ; Q1 = 200

Change in Price = 10

Change in Quantity = 200

Ed = 200/400 * 20/10 = 1.0

option "b" comes out to be right answer..

can someone give me explanation for answer "1.66" ???

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Pradumn Bajaj ( ) (46 Points)
Replied 17 November 2009

Originally posted by :Himanshu Bansal
"	See.. P= 20 ; Q = 400; P1 = 30 ; Q1 = 200 Change in Price = 10 Change in Quantity = 200 Ed = 200/400 * 20/10 = 1.0 option "b" comes out to be right answer.. can someone give me explanation for answer "1.66" ???	"