Question

A commodity shows Ex = (-) 2. Quantity demanded reduces from 300 units to 150 units in response
to increase in price. Find the increased price when initially it was 20 per unit.
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Answer 1

Answer:

Explanation:

Given,

Old demand = 300 units

New demand = 150 units

Old price = 20 per unit i.e.  300 x 20 = Rs.6000

elasticity of demand ( Ex ) = -2  

New price or increased price = x

    Thus, Change in demand = New demand - Old demand

                                                 = 150 - 300 = -150

             Change in price = New price - Old price      

                                         = x - 6000

Now, Ex =  Change in demand / Change in price x 100

         -2  =  -150 / x - 6000

           -2( x- 6000) = -150

          -2x + 12000 =  -150

             12000 + 150 = 2x

                   12150 = 2x

                   6075 = x

Thus, Increased price is Rs.6075.