Raju uses gas based heater at his house. The amount he uses depends on price of that gas and is given by x(p)-80-p^3. Assume current price of gas is 2 rupees per unit.
(a) Find the own price elaticity of demand. This is the short run elasticity.
2006-11-11 18:11:07 · 1 answers · asked by ruth k 1 in Social Science ➔ Economics
The question is asking by how many percent will demand change if prices change by 1%.
You can use complicated calculus, but there is also an easy way of working this out. Work out quantity demanded if p=2 (the question asks for the elasticity at this point). Then work out demand if p increases by 1% and work out how much X changes by as a percent.
To be even more precise, you could also do the same calculation for a 1% decrease in p (ie from 2 to 1.98) and see what answer you get. It should be very close to the same, but might not be exactly identical. If so, take the average.
2006-11-12 18:05:13 · answer #1 · answered by eco101 3 · 0⤊ 0⤋