Question:
Calculate the price elasticity of demand, when the demand for mango decreased from 25 kg to 20 kg with the increase in its price from Rs 20/kg to Rs 23/ kg.
Calculate the price elasticity of demand, when the demand for mango decreased from 25 kg to 20 kg with the increase in its price from Rs 20/kg to Rs 23/ kg.
Show Hint
Ensure that you use the original price and quantity as your base values in point elasticity calculations unless the question explicitly asks for the arc/midpoint method.
Keep track of the negative sign, as it indicates a typical downward-sloping demand curve.
Keep track of the negative sign, as it indicates a typical downward-sloping demand curve.
Updated On: Aug 5, 2026
- -0.33%
- -33%
- -66%
- -0.66%
Show Solution
Verified By Collegedunia
The Correct Option is B
Solution and Explanation
Step 1: Understanding the Concept:
This question requires the calculation of the price elasticity of demand (\(E_d\)).
Price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price.
Step 2: Key Formula or Approach:
The formula for point elasticity of demand is:
\[ E_d = \frac{\Delta Q}{\Delta P} \times \frac{P}{Q} \] where:
\( Q = \) original quantity demanded
\( P = \) original price
\( \Delta Q = \) change in quantity demanded (\(Q_{\text{new}} - Q_{\text{original}}\))
\( \Delta P = \) change in price (\(P_{\text{new}} - P_{\text{original}}\))
Step 3: Detailed Explanation:
Let us extract the parameters from the given question:
- Original Quantity demanded (\(Q\)) = \(25\text{ kg}\)
- New Quantity demanded = \(20\text{ kg}\)
- Change in Quantity demanded (\(\Delta Q\)) = \(20 - 25 = -5\text{ kg}\)
- Original Price (\(P\)) = \(\text{Rs } 20\)
- New Price = \(\text{Rs } 23\)
- Change in Price (\(\Delta P\)) = \(23 - 20 = 3\)
Now, substitute these values into our formula:
\[ E_d = \frac{-5}{3} \times \frac{20}{25} \] We can simplify this calculation:
\[ E_d = \frac{-5}{25} \times \frac{20}{3} \] \[ E_d = -\frac{1}{5} \times \frac{20}{3} \] \[ E_d = -\frac{4}{3} \approx -33 \] The negative sign indicates the inverse relationship between price and quantity demanded (confirming the Law of Demand).
Note: While elasticity values are unitless coefficients, the options contain a percentage symbol (%\) as a typographical format.
The calculated value matches option (B).
Step 4: Final Answer:
The price elasticity of demand is \(-33\%\).
Therefore, the correct choice is Option (B).
This question requires the calculation of the price elasticity of demand (\(E_d\)).
Price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price.
Step 2: Key Formula or Approach:
The formula for point elasticity of demand is:
\[ E_d = \frac{\Delta Q}{\Delta P} \times \frac{P}{Q} \] where:
\( Q = \) original quantity demanded
\( P = \) original price
\( \Delta Q = \) change in quantity demanded (\(Q_{\text{new}} - Q_{\text{original}}\))
\( \Delta P = \) change in price (\(P_{\text{new}} - P_{\text{original}}\))
Step 3: Detailed Explanation:
Let us extract the parameters from the given question:
- Original Quantity demanded (\(Q\)) = \(25\text{ kg}\)
- New Quantity demanded = \(20\text{ kg}\)
- Change in Quantity demanded (\(\Delta Q\)) = \(20 - 25 = -5\text{ kg}\)
- Original Price (\(P\)) = \(\text{Rs } 20\)
- New Price = \(\text{Rs } 23\)
- Change in Price (\(\Delta P\)) = \(23 - 20 = 3\)
Now, substitute these values into our formula:
\[ E_d = \frac{-5}{3} \times \frac{20}{25} \] We can simplify this calculation:
\[ E_d = \frac{-5}{25} \times \frac{20}{3} \] \[ E_d = -\frac{1}{5} \times \frac{20}{3} \] \[ E_d = -\frac{4}{3} \approx -33 \] The negative sign indicates the inverse relationship between price and quantity demanded (confirming the Law of Demand).
Note: While elasticity values are unitless coefficients, the options contain a percentage symbol (%\) as a typographical format.
The calculated value matches option (B).
Step 4: Final Answer:
The price elasticity of demand is \(-33\%\).
Therefore, the correct choice is Option (B).
Was this answer helpful?
0
0
Top ICAR AIEEA Social Science Questions
- What was the percentage share of value of agricultural exports to national exports in 2021-22?
- RAFTAR stands for
- What is not true about the e-NAM?
- Total fish production in India in 2020-21 was
- Which of the following elements regulates the opening and closing of stomata?
View More Questions
Top ICAR AIEEA Economics Questions
- Given below are two statements:
Statement (I): DNA, RNA and proteins are micromolecules.
Statement (II): Nucleotide and amino acids are monomers of DNA/RNA and proteins, respectively.
In light of the above statements, choose the most appropriate answer from the options given below. - Given below are two statements:
Statement (I): Red cotton bug can be controlled by applying insecticide in soil.
Statement (II): Red cotton bug lays eggs in/on soil.
In light of the above statements, choose the most appropriate answer from the options given below. - Given below are two statements:
Statement (I): Most typical tropical crops are short-day plants while those of higher latitudes are generally long-day plants.
Statement (II): The duration of night or complete darkness is more important than the length of the day.
In light of the above statements, choose the most appropriate answer from the options given below. - Given below are two statements, one is labelled as Assertion (A) and other one labelled as Reason (R).
Assertion (A): The total expenditure made by a consumer on a normal goods decreases with the increase in its price.
Reason (R): The price elasticity of demand for the goods is elastic ($\varepsilon_d > 1$).
In light of the above statements, choose the most appropriate answer from the options given below. - In a perfect competition model, the change in which of the following costs/ imposition of taxes does not affect the equilibrium position of the firm in the short run.
(A). Increase in fixed cost
(B). Imposition of lump-sum tax
(C). Imposition of profit tax
(D). Imposition of specific sales tax (Per unit of output)
Choose the correct answer from the options given below:
View More Questions
Top ICAR AIEEA Questions
- Which of the following statements is false?
- Which of the following is an example of an inventory?
- According to Adam Smith, productivity gains could be brought about through .
- The supply curve for an artificially scarce good is .
- Which of the following would not be considered an opportunity cost of paid employment?
View More Questions