9
Questions
1. Price elasticity of demand for flowers and toys are respectively (-) 0.9 and (-) 0.5. Demand for
which one is more elastic and Why?
2. Differentiate between law of demand and price elasticity of demand.
3. What is the price elasticity of demand for following demand curves: (i) Straight line demand
curve parallel to X-axis; (ii) Straight line demand curve parallel to Y-axis.
4. State with reasons, whether the following items will have elastic or inelastic demand: (i)
Matchbox; (ii) Coke; (iii) Medicines; (iv) NCERT Textbook; (v) Electricity; (vi) Cigarettes; (vii)
Butter for a poor person.
5. What will be price elasticity of demand in the following cases: (i) A rise in the price of
commodity increases the total household expenditure on it; (ii) A rise in the price of
commodity reduces the total household expenditure on it; (iii) A change in the price of a
commodity does not change the total expenditure.
6. When price is ₹10 per unit, demand for a commodity is 100 units. As the price falls to ₹8 per
unit, demand expands to ₹150 units. Calculate elasticity of demand.
7. When price of sugar is ₹5 per kg, its demand is 50 kg. When price rises by ₹5 per kg, its
demand falls by 10 kg. Calculate the elasticity of demand.
8. The demand for a good falls to 240 units in response to rise in price by ₹2. If the original
demand was 300 units at the price of ₹20, calculate price elasticity of demand.
9. The market demand for a good at ₹4 per unit is 100 units. Due to increase in price, the market
demand falls to 75 units. Find out the new price, if the price elasticity of demand is (-) 1.
10. When the price of good X is ₹5, the consumer buys 100 units of good X. At what price would
he be willing to purchase 140 units of good X? The price elasticity of demand for good X is 2.
11. A consumer spends ₹80 on a commodity when its price is ₹1 per unit and spends ₹96 when its
price is ₹2 per unit. Calculate price elasticity of demand for the commodity by the percentage
method.
12. The demand for a good at ₹10 per unit is 40 units. Price falls by ₹5. If price elasticity of
demand is (-) 3, calculate the new quantity demanded.
13. Price elasticity of demand for a product is 'unity'. A household buys 25 units of this product at
the price of ₹5 per unit. If the price of product rises by ₹1, how much quantity
of the product will the household buy?
14. When price of a commodity falls by 80%, the quantity demanded of it increases by 100%. Find
out its price elasticity of demand.
15. When price of a commodity gets doubled, its quantity demanded reduced to half. Calculate
the coefficient of price elasticity of demand.
16. A 5% fall in the price of x leads to 10% rise in the demand for x. A 20% rise in the price of y
leads to 6% fall in the demand for y. Calculate the price elasticities of demand of x and y. Out
of x and y, which commodity is more elastic?
17. A consumer buys 20 units of a good at ₹10 per unit. When its price falls by 10%, its demand
rises to 22 units. Find out the price elasticity of demand.
18. Calculate price elasticity of demand:
Price (₹) Total Expenditure (₹)
5 500
6 420
19. A consumer spends ₹80 on a commodity when its price is ₹1 per unit and spends ₹96 when its
price is ₹2 per unit. Calculate price elasticity of demand for the commodity by the percentage
method.
20. A dentist was charging ₹300 for a standard cleaning job and it used to generate total revenue
equal to ₹30,000 per month. She has, since last month, increased the price of dental cleaning
to ₹350. As a result, fewer customers are now coming for dental cleaning, but the total
revenue is now ₹33,250. From this, what can we conclude about the elasticity of demand for
her dental service?
1. Demand for flowers is more elastic as with 1% fall in price of flowers, its demand rises by
0.9%. However, in case of toys, 1% fall in price raises the demand by just 0.5%.
2. (i) Law of demand states the inverse relation between price of a commodity and its quantity
demanded, assuming no change in other factors. On the other hand, price elasticity of
demand indicates the rate of change in quantity demanded of the commodity due to change
in its price.
(ii) Law of Demand reflects the direction of change in demand, whereas, price elasticity of
demand measures the magnitude of change in demand.
3. The price elasticity of demand in the following cases will be: (i) Perfectly Elastic Demand;
(ii) Perfectly Inelastic Demand.
4. (i) Matchbox has inelastic demand as consumer has to spend a very small proportion of his
income.
(ii) Coke has elastic demand as it has number of substitutes.
(iii) Medicines have inelastic demand as their consumption cannot be postponed.
(iv) NCERT Textbook has inelastic demand as it is a necessity item.
(v) Electricity has elastic demand as it can be put to several uses.
(vi) Cigarettes have inelastic demand as its consumers are habituated.
(vii) Butter for a poor person has elastic demand as it is a luxury item for the poor person.
5. The price elasticity of demand in the following cases will be:
(i) As total expenditure rises with rise in price, demand is less elastic (Ed< 1).
(ii) As total expenditure falls with rise in price, demand is highly elastic (Ed > 1).
(iii) As total expenditure does not change with rise in price, demand is unitary elastic (Ed= 1).
6.
Ed = (-) 2.5 (Demand is highly elastic as Ed> 1) Negative sign of E indicates the inverse
relationship between price and quantity demanded.
7.
Ed= (-) 0.2 (Demand is less elastic as Ed< 1) Negative sign of E indicates the inverse relationship
between price and quantity demanded.
8.
Ed=(-) 2 (Demand is highly elastic as Ed> 1)
Negative sign of Ed indicates the inverse relationship between price and quantity demanded.
9.
As the quantity demanded is decreasing, price will increase. It means, New Price = Original
Price (P) + Change in Price (ΔP) = 4+1= ₹5
10.
As the quantity demanded is increasing, price will decrease. It means, New Price = Original
Price (P) - Change in Price (ΔP) = ₹5 - ₹1 = ₹4
11.
As the quantity demanded is decreasing, price will increase. It means, New Price = Original
Price (P) + Change in Price (ΔР) = 5 + 0.5= ₹5.5
12.
As price is decreasing, the quantity demanded will increase. It means, New Quantity = Original
Quantity (Q) + Change in Quantity
=40+60 = 100 units
13.
As price is increasing, the quantity demanded will decrease. It means, New quantity = Original
quantity (Q) –Change in quantity (ΔQ) = 25-5 = 20 units
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