Calculate elasticity in the following cases

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Reference no: EM13868139 , Length: 800 words

1. Calculate Elasticity in the following cases:

a) Assume that a business firm sells a product at the price of Rs 500. The firm has decided to reduce the price of the product to Rs 400. Consequently, the demand for the product is raised from 20,000 units to 25,000 units. Calculate the price elasticity of demand.

b) Suppose the monthly income of an individual increases from Rs 15,000 to Rs20,000. Now, his demand for clothes increases from 35 units to 40 units. Calculate the income elasticity of demand.

c) Assume that the quantity demanded for detergent cakes has increased from 400 units to 500 units with an increase in the price of detergent powder from Rs20 to Rs 25. Calculate the cross elasticity of demand between two products.

Reference no: EM13868139

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