The demand schedule for pens is given below
| Price of Pen (Rs. per pen) | Quantity Demanded |
| 25 | 50 |
| 20 | 100 |
Calculate the price elasticity of demand and determine the type of price elasticity.
Solution:
P= 25
Q = 50
P1= 20
Q1 =100
Therefore, a change in the price of pens is:
In the above calculation, a change in price shows a negative sign, which is ignored. This is because price and demand are inversely related which can yield a negative value of price (or demand). Similarly, a change in quantity demanded of pens is:
The price elasticity of demand for bread is 5, which is greater than one. Therefore, in such a case, the demand for pens is relatively elastic.