Question

If the demand function for a good is given by Qx = 20 - 2Px, how much is the quantity demanded when the price is Rs 4/unit?​

Answer 1

Answer:

The price elasticity of demand is 2 % or 0.02

Explanation:

Demand function

qx = 20 - 2px

When the price is Rs 5

qx = 20 - 2 (5)

= 20 - 10

= 10

When price falls to Rs 3 from Rs 5, then quantity demand of x unit is:

qx = 20 - 2(3)

= 20 - 6

= 14

The formula of price elasticity of demand is:

= % change in quantity demanded / % change in price

= (14 - 10)% / (5 -3)%

= 4 / 2

= 2 % or 0.02