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Byju's Answer
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Standard XI
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Economics
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Relationship between the TR, MR and Demand Curves
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A consumer bu...
Question
A consumer buys 10 units of a commodity at a price of Rs. 10 per unit. He incurs an expenditure of Rs. 200 on buying 20 units. Calculate price elasticity of demand by percentage method. Comment on the shape of the demand curve based on this information.
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Solution
Price (P)
Quantity demanded
Total expenditure
(
P
)
(
units
(
Q
)
)
(
R
s
)
(
R
s
)
(
P
×
Q
)
10
10
100
10
20
200
Total Expenditure = Price
(
P
1
)
×
Quantity
(
Q
1
)
200
=
P
r
i
c
e
(
P
1
)
×
20
200
÷
20
=
P
r
i
c
e
(
P
1
)
Price
P
1
=
R
s
.
10
per unit.
Δ
P
=
10
−
10
=
0
,
Δ
Q
=
20
−
10
=
10
Percentage Change in Quantity Demanded
=
Δ
Q
Q
×
100
=
10
10
×
100
=
100
%
Percentage Change in Price
=
Δ
P
P
×
100
=
10
10
×
100
=
0
%
E
d
=
Percentage Change in Quantity Demanded
Percentage Change in Price
or
E
d
=
∞
=
100
0
=
∞
Elasticity of demand is perfectly elastic. Therefore, demand curve is a straight line parallel to X-axis.