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Question

Price elasticity of demand of a good is ()1. When its price per unit falls by one rupee, its demand rises from 16 to 18 units. Calculate the price before change.

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Solution

Given, P=?;P=()Rs.1
Q=16 units;Q1=18 units;Q=Q1Q=(1816)units=2 units
Ed=()1
Price elasticity of demand (Ed)=PQ×QP
1=P16×21
8=P
Thus, P=8
Price before change =Rs.8.

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