Question

A consumer buys 80 units of a good at price of ₹5 per unit. Suppose price elasticity of demand is (-) 2 . At what price will he buy 64 units?

Answer 1

$E_d=\frac{\Delta Q}{\Delta P}\times \frac{P}{Q}$

$\Delta Q= 64 -80=-16$

$-2=\frac{-16}{\Delta P}\times \frac{5}{80}$

$\Delta P(-2)= -1$

$\Delta P= 0.5$

New price = original price+ change in price.

$New Price= 5 +0.5= 5.5$

$= 5.5$ per unit