Question

The quantity demanded of a commodity at a price of ₹ 10 per unit is 40 units. Its price elasticity of demand is −2. The price falls by 2 per unit. Calculate the quantity demanded at the new price.

Answer 1

Initial Price P₁ = ₹ 10

New Price P₂ = ₹ 10 − ₹ 2 = ₹ 8

Initial Quantity Q₁ ​= 40 units

Price Elasticity of Demand = −2

% change in price = `(P_2-P_1)/P_1xx100`

= `(8-10)/10xx100`

= `(-2)/10xx100`

= −20%

Price Elasticity of Demand = `"% change in quantity"/"% change in price"`

−2 = `"% change in quantity"/-20`

% change in quantity = (−2) × (−20)

= 40%

Q₂ = `Q_1+ (40/100xxQ_1)`

= `40 + (40/100xx40)` 

= 40 + 16 

= 56 units