Question

A consumer buys 160 units of a good at a price of 8 per unit. Price falls to 6 per unit. How much
quantity will the consumer buy at the new price, if price elasticity of demand is (-) 2?​

Answer 1

Answer:

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.

Explanation:

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