The demand for a good at Rs 10 per unit is 40 hnits. Price falls by Rs 5. If price elasticuty of demand is (-3), calculate the new quantity demanded.
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Explanation:
New Quantity = 100 units
Solution :
Price Elasticity of demand (Ed)=ΔQΔP×PQ−3=ΔQ−5×1040i.e.ΔQ=60units
As price is decreasing, the quantity demanded will increase, it means
New Quantity = Original Quantity (Q) + Change in Quantity
= 40+60 = 100 units
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