Question

Assume that the absolute value of price elasticity of demand for a commodity is one ( units) when the price is rs. 6, the demand is 500 units. what amount will be demanded if price falls to rs. 5​

Answer 1

Answer:

1. 500/6=83.3 now 500-83.3=406.7 units

Answer 2

Answer:

Explanation:

We can use this information to calculate the new quantity demanded when the price falls from Rs. 6 to Rs. 5:

Percentage change in price = ((6-5)/6) x 100% = 16.67%

Since the absolute value of the price elasticity of demand is one, the percentage change in quantity demanded will also be 16.67%.

Percentage change in quantity demanded = 16.67%

Now we can calculate the new quantity demanded as follows:

New quantity demanded = Old quantity demanded x (1 + percentage change in quantity demanded)

New quantity demanded = 500 x (1 + 16.67%)

New quantity demanded = 500 x 1.1667

New quantity demanded = 583.35

Rounding this down to the nearest whole number, we get that the new quantity demanded is 583 units.

Therefore, if the price falls from Rs. 6 to Rs. 5 and the absolute value of price elasticity of demand is one, the new quantity demanded will be 583 units.