Price elasticity of demand of a good is (-)1. At a given price the consumer buys 60 units of the good. How many units will the consumer buy if price falls by 10 per cent?
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Given: Ed = -1, Q1 = 60, % Change in Price = -10%
Ed = % Change in Price/% Change in Qty
-1 = -10/% Change in Qty
% Change in Qty = (-10)/(-1)
% Change in Qty = 10
Therefore:
% Change in Qty = ΔQ/Q0*100
10 = ΔQ/60*100
∆Q = 10*60/100
∆Q = 6
Q1 = ∆Q + Q0
Q1 = 6+60
Q1 = 66
New Qty is 66.
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