GK
BUSINESS ECONOMICS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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ep= (((Q2- Q1) / Q1) / P1) X 100
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ep= ((Q2- Q1) / Q1) / ((P2- P1) / P1)
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ep= (((Q2- Q1) / Q1) / Product) X 100
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ep=( (P1- P2) / Q1) X ((P1+P2) / Q2)
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Detailed explanation-1: -1) If Ep > 1, demand is elastic. This means that a slight variation in price can produce greater change in quantity demanded. Therefore, hike in prices will negatively affect revenue, as the sales will drop with increase in price and vice versa. 2) If Ep < 1, demand is inelastic for the particular good or service.
Detailed explanation-2: -The price elasticity of demand is a calculation of the degree of change in a commodity’s demand with respect to the price change of that commodity. The price elasticity of demand, in other words, is the rate of change in the quantity requested in response to the price change. It is sometimes denoted by Ep or PED.
Detailed explanation-3: -The coefficient indicates the percentage shift in the quantity demanded caused by a 1% change in price. The elasticity coefficient is expressed as follows: ‘E = (%∆y) / (%∆x), or E = (%∆Q) / (%∆P).