Elasticity of Demand

1. What is elasticity of demand? Mention the 3 dimensions of Elasticity

of demand.
2. Price elasticity of demand for flowers and toys are respectively (-)0.9
and (-)0.5. Demand for which one is more elastic.
3. Explain briefly along with diagram–
a) Highly elastic demand
b) Less elastic demand
c) Unit elastic demand
4. Explain the factors affecting the price elasticity of demand.
5. Explain the relationship between price elasticity of demand and total
expenditure.
6. Explain the percentage change method\Proportionate method used
to find the price elasticity of demand.
7. Solve the following –
(i) As price of a commodity falls from ₹7 per kg to ₹5 per kg,
the total expenditure on it increases from ₹3,500 to
₹6,250. Find out the elasticity of demand. (Ans. -5.25)
(ii) Suppose that, there was a 4% decrease in price of a
good and the expenditure on good increased by 2%. What
can you say about elasticity of demand?
(iii) The price elasticity of demand for a good is -0.4. If its
price increases by 5%, by what percentage will its demand
fall? Calculate. (Ans. 2%)
(iv) Price elasticity of demand of a good is (-)0.75..
Calculate the percentage fall in its price that will result in
15% rise in its demand. (Ans. 20%)
(v) 5% Fall in the price of a good rises its demand from
300 units to 318 units. Calculate its price elasticity of
demand. (Ans. 1.2)
(vi) When the price of a commodity falls by 20%, its
demand rises from 400 units to 500 units. Calculate its price
elasticity of demand. (Ans. 1.25)
(vii) Calculate price elasticity of demand –
Price per unit(₹) Quantity demanded (units)
0 10
1 5
(Ans. 0)
(viii) The price elasticity of demand for good X is known to
be twice that of good Y. Price of X falls by 5% while that of
good Y rises by 5%. What is the percentage change in the
quantities demanded of X and Y? (Ans. X rises by 10%, Y
falls by 5%)
(ix) The price elasticity of demand for goods X and Y are
known to be 1 and 2 respectively. Price of X rises by 5%
while that of good Y falls by 5%. What are the percentage
 changes in the quantities demanded of X and Y? (Ans. X
will fall by 5%, Y will rise by 10%)
(x) The percentage change in demand is three times the
percentage change in price. If original demand was 30
units at the price of ₹7 per unit, then calculate the price
elasticity of demand, given price increased by 10%.
Indicate whether the demand is elastic or not. Also
calculate the new quantity demanded.(Ans. Ed=-3, Ed>1,
New quantity = 21 units
(xi) The demand function of commodity ‘X’ is given as:
Qx = 20 – 2Px. Calculate its price elasticity of demand
when price falls from ₹5 to ₹3. (Ans. Ed=(-)1)