Using the arc (mid-point) method, the price elasticity of demand for wheat when price falls from Rs 20 (Q = 500) to Rs 18 (Q = 520) is approximately:

1. Arc formula: $E_p = \dfrac{Q_2-Q_1}{Q_2+Q_1}\times\dfrac{P_2+P_1}{P_2-P_1}$. 2. Substitute $Q_1=500,Q_2=520,P_1=20,P_2=18$: $E_p = \dfrac{20}{1020}\times\dfrac{38}{2}$. 3. Compute: $\dfrac{20}{1020}\approx0.0196$ and $\dfrac{38}{2}=19$, so $0.0196\times19\approx0.37$. 4. Since 0.37 < 1, demand for wheat is inelastic. _Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit I "Law of Demand and Elasticity of Demand", p.24_