A consumer buys $10$ units of a good at a price of $R s . 6$ per unit. Price elasticity of demand is $(-) 1$ . At what price will he buy $12$ units? Use expenditure approach of price elasticity of demand to answer this question.

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Solution

$\begin{matrix} Price & Demand (Units) & Total expenditure (R s) (P) & (Q) & (R s .) (P \times Q) 6 & 10 & 60 5 & 12 & 60 \end{matrix}$

Given, $E_{d} = (-) 1$

In this case, when elasticity of demand is $(-) 1$ , total expenditure will remain constant.

Total expenditure $= 10 \times 6 = R s . 60$

$∵$ Total expenditure does not change.

When quantity is $12$ units,

Price $=$ TE $\div$ Q $= 60 \div 12 = R s . 5 per unit$

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