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16. Price of the commodity increases from Rs 50 to Rs 60 per unit. Quantity demanded initially was 200 units . What should be the new quantity so that elasticity of demand is established to be unitary?
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16. Price of the commodity increases from Rs 50 to Rs 60 per unit. Qua...
Calculating the New Quantity Demanded for Unitary Elasticity of Demand
When the price of a commodity increases from Rs 50 to Rs 60 per unit, the quantity demanded initially at Rs 50 was 200 units. To establish unitary elasticity of demand, we need to calculate the new quantity that will be demanded at the new price of Rs 60 per unit.
Step 1: Calculate the Price Elasticity of Demand
Price Elasticity of Demand (PED) is the percentage change in the quantity demanded of a commodity due to a percentage change in its price. It is given by the formula:
PED = (Percentage change in quantity demanded) / (Percentage change in price)
Using the initial values:
PED = ((Q2 - Q1) / ((Q1 + Q2) / 2)) / ((P2 - P1) / ((P1 + P2) / 2))
Where Q1 = 200 units, P1 = Rs 50 per unit, P2 = Rs 60 per unit
Solving for Q2, we need to find the new quantity demanded at Rs 60 per unit when PED = 1:
Step 2: Solve for the New Quantity Demanded
Setting PED = 1 and substituting the initial values:
1 = ((Q2 - Q1) / ((Q1 + Q2) / 2)) / ((60 - 50) / ((50 + 60) / 2))
Solving for Q2:
Q2 = ((1 + PED) / (1 - PED)) * ((P2 + P1) / 2) * (Q1)
Substituting the values, we get:
Q2 = ((1 + 1) / (1 - 1)) * ((60 + 50) / 2) * (200)
Q2 = 400 units
Step 3: Interpretation
The new quantity demanded at Rs 60 per unit to establish unitary elasticity of demand is 400 units. This means that a 20% increase in price (from Rs 50 to Rs 60 per unit) results in a 100% increase in quantity demanded (from 200 to 400 units).
Community Answer
16. Price of the commodity increases from Rs 50 to Rs 60 per unit. Qua...
New quantity = 160 Units
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16. Price of the commodity increases from Rs 50 to Rs 60 per unit. Quantity demanded initially was 200 units . What should be the new quantity so that elasticity of demand is established to be unitary?
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16. Price of the commodity increases from Rs 50 to Rs 60 per unit. Quantity demanded initially was 200 units . What should be the new quantity so that elasticity of demand is established to be unitary? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about 16. Price of the commodity increases from Rs 50 to Rs 60 per unit. Quantity demanded initially was 200 units . What should be the new quantity so that elasticity of demand is established to be unitary? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for 16. Price of the commodity increases from Rs 50 to Rs 60 per unit. Quantity demanded initially was 200 units . What should be the new quantity so that elasticity of demand is established to be unitary?.
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