Question

A consumer buy 40 units of a good at a price of 5 per unit and the price elasticity is 1.5

Answer 1

Answer:

Price elasticity =proportionate change in Qty/Proportionate change in price

-1.5 = (∆q/Q)/(∆p/p)

-1.5 •(∆p/p) =∆q/q

-1.5.• -.1/.5) =+ (3/2) •1/5 =3/10

∆q/Q=3/10 =O.3

∆q = 0.3×Q = .3×40=12

Quantity bought=40+12 = 52