Suppose a consumer purchase 15 bananas when its price is Rs. 5 per banana. When the price increases to Rs. 7 per banana, consumer reduces his demand to 12 bananas. Price elasticity of demand would be...........

1. 0.5
2. 0.6
3. 0.4
4. 0.7

Option 1 -> Using the formula: PED = (% change in quantity / % change in price). Here, quantity changes from 15 to 12 (-20%) and price changes from Rs. 5 to Rs. 7 (40%), giving PED = 0.5.

Option 2 -> This would result from incorrect calculation of percentage changes.

Option 3 -> This value doesn't match the correct calculation of elasticity for the given data.

Option 4 -> This would result from miscalculating either the percentage change in quantity or price.

Hence, Option 1: 0.5 -> Price Elasticity of Demand = (% change in quantity demanded) / (% change in price). Change in quantity = (12-15)/15 = -20%. Change in price = (7-5)/5 = 40%. PED = |-20%/40%| = 0.5. This indicates inelastic demand, meaning quantity demanded is relatively less responsive to price changes. -> correct