Question

Price elasticity of demand of a good is (-) 1. Calculate the percentage change in price that will raise the demand from 20 units to 30 units.

Answer 1

Given that

`Q_1` = 20

`Q_2` = 30

`E_d `= -1

`ΔQ = Q_2 - Q_1 = 30 - 20 = 10`

We know that

`E_d = "% change in quantity demanded"/"% change in price"`

`-1 = ("ΔQ"/Q_1 xx 100)/"% change in price" = (10/20 xx 100)/"% change in p"`

`-1 = 50/"% change in price"`

% change in price  = -50

Thus 50% fall in price will increase the demand from 20 units to 30 units.