Question

The demand for good at ₹10 per unit is 40 units. Price falls by ₹5. If price elasticity of demand is -3, calculate the new quantity demanded.​

Answer 1

Answer:

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Answer 2

The new quantity demanded will be 100 units.

Given: D1(Demand for good)=40

P(original price)= 10

Changes in price = -5

Ed(Elasticity of demand)= -3

To Find: New quantity demanded

Solution:

As Ed is the elasticity of demand

Ed= ΔQ/ΔP * P/Q

Here ΔQ represents a change in quantity demanded and ΔP represents a change in price and P and Q are the original price and quantity demanded

So, substituting their respective values

-3= ΔQ/-5*10/40

-3= ΔQ*10/-200

ΔQ= 60 units

Now as we know that new quantity demanded is an addition of both changes in quantity demanded and the original quantity demanded

So New Quantity= ΔQ+Q=60+40=100 units

Therefore the new quantity demanded will be 100 units

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