CAPF AC 2020 Q48: Indian Economy – Microeconomics & Market Concepts
Kumar used to eat 30 samosas in a month when the price of each samosa was ₹12. When the price of samosa increased to ₹15 per piece, he eats only 20 samosas a month. What is the price elasticity of demand for samosa by Kumar?
- (a) 1·33
- (b) 1·00
- (c) 0·75
- (d) 0·08
Answer: (a) 1·33
Explanation
Price elasticity of demand
How to think: elasticity compares two percentage changes.
Find each one separately, then divide.
Formula: price elasticity = % change in quantity ÷ % change in price
| Step | Working |
|---|---|
| Change in quantity | 30 to 20, a fall of 10 |
| % change in quantity | 10 / 30 = 33.33% |
| Change in price | ₹12 to ₹15, a rise of 3 |
| % change in price | 3 / 12 = 25% |
| Elasticity | 33.33 / 25 = 1.33 |
What the number means:
| Value | Demand is | Meaning |
|---|---|---|
| More than 1 | Elastic | Quantity changes more than price |
| Equal to 1 | Unit elastic | Both change equally |
| Less than 1 | Inelastic | Quantity changes less than price |
Kumar's demand for samosa is elastic.
Answer: (a) 1·33.
Why each option is right or wrong
- (a) CORRECT. 33.33% fall in quantity divided by a 25% rise in price gives 1.33.
- (b) Incorrect. 1.00 would need quantity and price to change by the same percentage.
- (c) Incorrect. 0.75 is the ratio upside down: 25 divided by 33.33.
- (d) Incorrect. 0.08 comes from dividing the wrong numbers, not percentage changes.
Key point
Price elasticity = % change in quantity ÷ % change in price = (10/30) ÷ (3/12) = 33.33% ÷ 25% = 1.33 (elastic).
Remember
Elasticity = % change in quantity ÷ % change in price.
Common mistakes
- Dividing the price change by the quantity change and getting 0.75.
- Using the new values (20 and 15) as the base instead of the original 30 and 12.
- Dividing the raw changes (10 by 3) without turning them into percentages.
Exam tip
Quantity on top, price below. If you get a number under 1 here, you have flipped the ratio.
Sources
- NCERT Class XII Economics — Introductory Microeconomics: Theory of Consumer Behaviour (elasticity of demand)
- N. Gregory Mankiw — Principles of Economics (Elasticity and Its Application)