Question

A consumer buys 100 units of a good x at a price of rs 10 per unit The price elasticity of demand for this good is 2 price falls by Rs 2 per unit how many goods x will be now buy at this price

Answer 1

Explanation:

Suppose consumer buys 140 units at price Rs.X per unit.

Price elasticity of demand (E

d

)=(−)

Q

P

×

△P

△Q

Here, P=Rs.5;P

1

=Rs.X;△P=P

1

−P=Rs.(X−5)

Q=100 units;Q

1

=140 units;△Q=Q

1

−Q=(140−100)units=40 units

E

d

=2

Price elasticity of demand (E

d

)=(−)

Q

P

×

△P

△Q

2=(−)

100

5

×

(X−5)

40

=(−)

X−5

2

2×(X−5)=−2 or 2X−10=−2

2X=−2+10=8

X=4

The consumer will purchase 140 units of Good-Y at the price of Rs.4.