Question

the price elasticity of demand of a commodity is -0.5 at a price of rupees 20 per unit total expenditure on it is rupees 2,000 its price is reduced by 10% calculate its demand at the reduced rate​

Answer 1

price elasticity of demand = -0.5

total expenditure = 2000

original price  = 20

original demand = 2000/20

                            = 100

% change in price =  -10%

new demand = x

-0.5 =  y / -10

y =  -0.5 * -10

y = 5

y = change in demand / original demand * 100

5 = z / 100 *100

5 = 100z /100

5 = z

x = z + original demand

x = 5 + 200

x = 205

the new demand is 205