1 . A consumer buys 160 units of a good at a price of 8 per unit. Price falls to 6. How much quantity will the consumer buy at the new price,if price elasticity of demand is (-) 2?
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Explanation:
As in the above numerical, elasticity of demand has been specified with a negative sign. Accordingly, we need not use
′
−
′
sign as a prefix to the formula of measuring elasticity of demand. Thus,
E
d
=(−)
Q
P
×
△P
△Q
Here, P=Rs.8;P
1
=Rs.6;△P=P
1
=Rs.6−Rs.8=(−)Rs.2
Q=160 units;Q
1
=X units;△Q=Q
1
−Q=(X−160)units
E
d
=(−)2
Thus, (−)2=
160
8
×
−2
X−160
=
−40
X−160
X−160=80
X=80+160=240
The consumer will buy 240 units at the new price.
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