Kumar used to eat 30 samosas in a month when the price of each samosa was ₹12. When the price of samosa increased to ₹15 per piece, he eats only 20 samosas a month. What is the price elasticity of demand for samosa by Kumar ?
[amp_mcq option1=”1.33″ option2=”1.00″ option3=”0.75″ option4=”0.08″ correct=”option1″]
This question was previously asked in
UPSC CAPF – 2020
Initial Price (P1) = ₹12, Initial Quantity (Q1) = 30 samosas
New Price (P2) = ₹15, New Quantity (Q2) = 20 samosas
Change in Quantity (ΔQ) = Q2 – Q1 = 20 – 30 = -10
Change in Price (ΔP) = P2 – P1 = 15 – 12 = 3
Percentage change in quantity demanded = (ΔQ / Q1) * 100 = (-10 / 30) * 100 = -33.33%
Percentage change in price = (ΔP / P1) * 100 = (3 / 12) * 100 = 25%
Price Elasticity of Demand (Ed) = |(Percentage change in quantity demanded) / (Percentage change in price)| = |-33.33% / 25%| = |-1.333…| = 1.33