Question

If the price of a commodity falls by 20% it's quantity demanded rises from 200 to 260. Calculate price elasticity of demand​

Answer 1

Answer:

P=Rs.50; P

1

=Rs.60;

△P=P

1

−P= Rs.60−Rs.50=Rs.10

Q=200 units; E

d

=1

We know,

Price elasticity of demand (E

d

)=(−)

Q

P

×

△P

△Q

1= (−)

200

50

×

10

△Q

1=(−)

40

△Q

△Q=(−)40

Q

1

=Q+△Q

New quantity = 200+(−)40

=200−40=160

In order to get unitary elasticity, new quantity should be160 units.