Price elasticity of demand of a good is (-) 2. The consumer buys a certain quantity of this good at a price of Rs. 8 per unit. When the price falls, he buys $50 %$ more quantity. What is the new price?

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Solution

Given, $E_{d} = (-) 2, P = R s . 8, P_{1} = ?$

Percentage change in quantity demanded $= 50 %$

$E_{d} = \frac{Percentage Change in Quantity Demanded}{Percentage Change in Price}$

$(-) 2 = \frac{50}{Percentage Change in Price}$

Percentage Change in Price $= (-) \frac{50}{2} = (-) 25 %$

So, $P_{1} = P + Δ P = P - (25 % of actual price)$

$= 8 - (8 \times \frac{25}{100}) = 8 - 2 = R s . 6 p e r u n i t$

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Price elasticity of demand of a good is (-) 2. The consumer buys a certain quantity of this good at a price of Rs. 8 per unit. When the price falls, he buys 50% more quantity. What is the new price?

Given, Ed=(−)2,P=Rs.8,P1=? Percentage change in quantity demanded =50% Ed=Percentage Change in Quantity DemandedPercentage Change in Price (−)2=50Percentage Change in Price Percentage Change in Price =(−)502=(−)25% So, P1=P+ΔP=P−(25%of actual price) =8−(8×25100)=8−2=Rs. 6 per unit

Price elasticity of demand of a good is (-) 2. The consumer buys a certain quantity of this good at a price of Rs. 8 per unit. When the price falls, he buys $50 %$ more quantity. What is the new price?