Practice $1$: Elasticities

A $20\%$ rise in the price of chicken causes the amount of chicken you buy to fall by $20\%.$ Your price elasticity of demand is $1.$

$20\frac{\%}{20}\%=1$

A $40\%$ fall in the price of strawberries causes the quantity demanded of strawberries to increase by $80\%.$

I$)$ What is the price elasticity of demand for strawberries?

$80\frac{\%}{40}\%=2$

II$)$ Is the demand for strawberries elastic or inelastic? Why?

Price elasticity of demand is elastic. Price elasticity of demand is said to be elastic when the percentage change in the quantity demanded of a commodity is more than percentage change in price. Here, as quantity demanded of strawberries has increased by $80\%$ whereas percentage change in price $40\%,$ price elasticity of demand is $2.$ Hence, price elasticity of demand is elastic.