Elasticity Of Demand

To calculate the price elasticity of demand, we first determine the changes in quantity and price. The initial price $P_1$ is Rs 4 and the initial quantity $Q_1$ is 25 units. The new price $P_2$ is Rs 5, so the change in price $\Delta P$ is . The new quantity $Q_2$ is 20 units, meaning the change in quantity $\Delta Q$ is . Using the formula $e_D = \frac{\Delta Q}{\Delta P} \times \frac{P_1}{Q_1}$, we substitute the values to get $\frac{-5}{1} \times \frac{4}{25}$. Simplifying this expression gives an elasticity of $-0.8$. Taking the absolute value, the price elasticity of demand is .