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Question

Price of a good changes from Rs 5 to Rs 20 and supplied quantity increases by 15. If price elasticity is 0.5, the final output level is .

A
10 units
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B
15 units
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C
20 units
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D
25 units
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Solution

The correct option is D 25 units
Given that p0=Rs 5, p1=Rs 20,Δq=15, ϵs=0.5Δp=p1p0=Rs 15 ϵs=ΔqΔp×p0q0ϵs=1515×5q0=0.5q0=50.5=10q1=q0+15=25

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