a consumer buy 40 units of a good at price of 5 per unit suppose the price elasticity of demand is -2 at what price will he buy 32 units
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Original quantity = 40
Original price = 5
Elasticity of demand = -2
New quantity = 32
New price = ?
Elasticity of demand = change in quantity/change in price * quantity/price
-2 = -8 / x-40 * 40 / 5
-2 = -8 / x-40 * 8
-2 = -64 / x-40
-2( x-40) = -64
-2x + 80 = -64
80 + 64 = 2x
144 = 2x
x = 72
Therefore , the new price is 72
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