Suppose the price of mangoes increases from ₹ 50 per kg to ₹ 75 per kg. Due to this, the demand for mangoes declines from 100 kg to 50 kg. Which one of the following is the price elasticity of demand for mangoes?
4
3
2
1
Answer is Wrong!
Answer is Right!
This question was previously asked in
UPSC CAPF – 2018
Price (P1) = ₹50, Quantity (Q1) = 100 kg
Price (P2) = ₹75, Quantity (Q2) = 50 kg
Change in Quantity (ΔQ) = Q2 – Q1 = 50 – 100 = -50
Change in Price (ΔP) = P2 – P1 = 75 – 50 = 25
Ed = |(ΔQ / Q1) / (ΔP / P1)| or |(ΔQ / ΔP) * (P1 / Q1)|
Ed = |(-50 / 100) / (25 / 50)| = |-0.5 / 0.5| = |-1| = 1.
Using the formula |(ΔQ / ΔP) * (P1 / Q1)| = |(-50 / 25) * (50 / 100)| = |-2 * 0.5| = |-1| = 1.
Using the final point (P2, Q2) would yield Ed = |(-50 / 25) * (75 / 50)| = |-2 * 1.5| = |-3| = 3. However, the standard calculation from the initial state is typically preferred unless using the midpoint formula (which would yield approx 1.67, not an option). Given the options, 1 is the result of the standard point elasticity calculation from the initial price and quantity.