The price elasticity of demand for a good X is -3. If the quantity demanded for X was 50 units at price ₹10 per unit, What will be the quantity demanded when its price falls by 50%?
Answers
Answer:
Quantity demanded when price falls by 50% is 65 units.
Explanation:
Price elasticity of Demand (PEd) =
% Change in Qty demanded of good
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% Change in Price of the good
This can be expressed in mathematical variable terms as
Q2 - Q1
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P2 - P1
where, Q1 is the original quantity demanded, P1 is the original price, Q2 is the changed quantity demanded, and P2 is the changed price of the commodity
In the question we are given with the following units
PEd = (-3)
Q1 = 50 units
P1 = 10 rupees
Price falls by 50% hence the new price i.e. P2 is 50% of 10 which is rupees 10.
Hence with the above given variables we can find the new quantity demanded which is Q2.
The equation is
-3 = Q2 - 50/5-10
= 65 units