Assume that a business firm sells a product at the price of Rs. 450. The firm has decided to reduce the price of the product to Rs. 350. Consequently, the demand for the product is raised from 25,000 units to 35,000 units. Calculate the price elasticity of demand

Economics Question:

Assume that a business firm sells a product at the price of Rs. 450. The firm has decided to reduce the price of the product to Rs. 350. Consequently, the demand for the product is raised from 25,000 units to 35,000 units. Calculate the price elasticity of demand.

Answer is 1.8. Thus, elasticity of demand is greater than 1.

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