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NCERT · Class 12 · Economics

Chapter 2: Theory of Consumer Behaviour

Practice each question, then open the answer or worked solution.

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Questions

26 questions
Q21Written answer

Explain price elasticity of demand

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Worked solution

Price elasticity of demand measures how a change in price affects the demand for the product among its consumers. It is determined by dividing the percentage change in the quantity of a product demanded by the percentage change in the cost of the product. Here, elasticity refers to the responsiveness of the product’s demand in relation to its price. The price elasticity of demand changes from one product to another.

It can be represented as:

NCERT Microeconomics Solutions for Class 12 Chapter 2- 11

Where

%∆ in Qd = Percentage change in demand for a good

%∆ in P = Percentage change in price of good

Or

NCERT Microeconomics Solutions for Class 12 Chapter 2- 12

Where,

ΔQ = Q2 − Q1, the percentage change in the demand for a good

ΔP = P2 − P1, the percentage change in the price of good

P = Initial price

Q = Initial quantity

Q22Written answer

Consider the demand for a good. At price Rs 4, the demand for the good is 25 units. Suppose the price of the good increases to Rs 5, and as a result, the demand for the good falls to 20 units. Calculate the price elasticity.

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Worked solution

According to the question

P1 = 4

P2 = 5

ΔP = P2 − P1

= 5 − 4

= 1

 Q1 = 25

Q2 = 20

ΔQ = Q2 − Q1

= 20 − 25

= −5

NCERT Microeconomics Solutions for Class 12 Chapter 2- 13

Q23Written answer

Consider the demand curve D (p) = 10 − 3p. What is the elasticity at price?

NCERT Microeconomics Solutions for Class 12 Chapter 2- 14

NCERT Microeconomics Solutions for Class 12 Chapter 2- 15

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Q24Written answer

Suppose the price elasticity of demand for a good is −0.2. If there is a 5% increase in the price of the good, then by what percentage will the demand for the good go down?

NCERT Microeconomics Solutions for Class 12 Chapter 2- 16

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Q25Written answer

Suppose the price elasticity of demand for a good is −0.2. How will the expenditure on the good be affected if there is a 10% increase in its price?

NCERT Microeconomics Solutions for Class 12 Chapter 2- 17

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Q26Written answer

Suppose there was a 4% decrease in the price of a good, and as a result, the expenditure on the good increased by 2%. What can you say about the elasticity of demand?

NCERT Microeconomics Solutions for Class 12 Chapter 2- 18

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