Question

The demand curve is QD=500-1/2P

Find the point at which point elasticity is equal to -1.

Answer 1

$Ed = -b×P/Qd.$

$-1/2×(1000 - 2Q)/Q = -1,$

(1000 - 2Q)/Q = 2,

1000 - 2Q = 2Q (Q is not equal zero),

4Q = 1000,

Q = 250 units,

P = 1000 - 2×250 = 500.