Price elasticity of demand for a commodity is unity and a household demands 50 units of it when its price is rupees 2 per unit. At what price will the household demands 45 units of the commodity?
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Explanation:
Price elasticity of demand for a commodity is unity and a household demands 50 units of it when its price is rupees 2 per unit. At what price will the household demands 45 units of the commodity?
Answer: The household demands 45 items at a price of 2.2 per unit.
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Answer:
At a price of Rs 2.2, the households will demand 45 units of commodity.
Explanation:
Given,Ed = 1
Q0 = 50 units
P0 = Rs 2
Q1 = 45 units
P1 = ?
ΔQ = Q1 − Q0
ΔQ = 45 − 50 = −5
ΔP = P1 − P0
ΔP = P1 − 2
Ed = (−)ΔQ/ΔP × P0/Q0
1 = (−)−5/P1−2 × 2/50
P1 = Rs 2.2
At a price of Rs 2.2, the households will demand 45 units of commodity.
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