Ep of a good is (-)5. At the price of ₹ 10 per unit a consumer buys 200 units. At what price will he buy 100 units?
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STATISTICS
A consumer buys 100 units of Good−Y at Rs.5 per unit. The price elasticity of demand for the good is 2. At what price will he be willing to buy 140 units of Good−Y?
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ANSWER
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.
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