Question

A business currently selling $10,000$ units of its product per month plans to reduce the retail price from $Rs.1$ to $Rs.0.90$. It knows from previous experience that the price elasticity of demand for the product is $(-)1.5$. Assuming no other changes, the sales the business can now expect will be __________.

• A. $8500$
• B. $10,500$
• C. $11,000$
• D. $11,500$

Answer 1

The correct option is D $11,500$

$ed=\frac{△q}{△p}\times \frac{p}{q}$
$(-)1.5=(-)\frac{△q}{.10}\times \frac{1}{10000}$
New Quantity demanded $=10000+1500=11500$.