Question

Suppose the price elasticity of demand for a good is -0.2 if there is a 5% increase in the price of the good, by what percentage will the demand for the good go dowm ?

Answer 1

Given % Change (Rise) in price =5% Elasticity of Demand `(E_(d))= (-)0.2`
Elasticirty of Demand `(E_(d))= ("Percentage Change in Quantity Demanded")/("Percentage Change in price ")`
`(-) 0.2 = ("Percentage Change in Qunatity Demanded")/5`
Percentage fall in demand =1%