Question

The consumer buys $160$ units of a good at a price of $Rs.8$ per unit. Price falls to $Rs.6$ per unit. How much quantity will the consumer buy at the new price if price elasticity of demand is $(-)2$?

Answer 1

As in the above numerical, elasticity of demand has been specified with a negative sign. Accordingly, we need not use ${}^{\prime }{-}^{\prime }$ sign as a prefix to the formula of measuring elasticity of demand. Thus,
$E_d=(-)\frac{P}{Q}\times \frac{△Q}{△P}$
Here, $P=Rs.8;P_1=Rs.6;△P=P_1=Rs.6-Rs.8=(-)Rs.2$
$Q=160units;Q_1=Xunits;△Q=Q_1-Q=(X-160)units$
$E_d=(-)2$
Thus, $(-)2=\frac{8}{160}\times \frac{X-160}{-2}=\frac{X-160}{-40}$
$X-160=80$
$X=80+160=240$
The consumer will buy $240$ units at the new price.