Question

With the rise in price by ₹ 5, the quantity demanded changes from 100 units to 95 units. The price elasticity of demand is (–) 1.2. Find out the price before change.

Answer 1

Given e_p = (–) 1.2, ΔP = 5, Q = 100, ΔQ = 95 – 100 = –5

e_p = `"ΔQ"/"ΔP" xx P/Q`

⇒ –1.2 = `(–5)/5 xx P/100`

⇒ –1.2 = `– P/100`

⇒ P = 1.2 × 100

=  ₹ 120