Question

The demand for a product is unit elastic. At a price of $20, 10 units of a product are sold. What would one expect sales to equal if the price is increased to $40? Be sure to provide an explanation

Answer 1

It is given that demand is unit elastic. It means it is equal to 1. It is given that the pries of $20, 10 units are sold

Now. price increased to $40.

When the demand is unit elastic that is 1, the total revenue remains the same even if the price increases or decrease

Initial total revenue.

TR =$\$20\times 10= \$200$

It means that the total revenue is $200 when the price increases to $40.

200 = $\$40\times Q$

$Q=\frac{200} {40}$ = 5