If the price of a commodity rises by 10% and its quantity demanded falls from 40 units to 30 units, calculate the coefficient of price elasticity of demand. Comment on the nature of price elasticity of demand.

OR

Explain the effect of the increase in the level of air pollution, on the market demand for ‘‘Air Purifiers’’. (Use diagram)

Q = 40

Q1 = 30

Change in price = 10%

Percentage in quantity = Change in Quantity/ Quantity X 100

= 10/40X100

= 0.25 X 100

= 25

Price elasticity of demand = Percentage change in quantity/ Percentage in price

= 25/10

= 0.4

The demand is more elastic as the elasticity of demand is less than one.

OR

Market demand refers to the quantity of a commodity that all the consumers are willing and able to buy at a particular price during a given period of time. If the pollution in air increases, the demand for air purifier will also increase. This will lead to a rightward shift in the market demand curve.

The x-axis represents the quantity demanded of air purifier and the Y-axis represents the Price of the air purifier. DD is the demand curve. If air pollution increases, the demand for air purifier have also increased. The demand curve shifts to the right to D1D1.