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Price elasticity of demand for a good is -2 the consumer buys a certain quantity of of this good at a price of rupees 8 per unit when the price falls he buys 50% more quantity what is the new price?
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Price elasticity of demand for a good is -2 the consumer buys a certai...
Price elasticity of demand and its value
Price elasticity of demand refers to the degree of responsiveness of the demand for a good to a change in its price. The value of price elasticity of demand can be positive, negative, or zero. A negative value of price elasticity of demand means that the demand for a good is inversely proportional to its price.
Given data and calculations
Here, the price elasticity of demand for the good is -2. This means that a 1% decrease in the price of the good will result in a 2% increase in the quantity demanded.
The consumer buys a certain quantity of the good at a price of Rs. 8 per unit. Now, when the price falls, the consumer buys 50% more quantity of the good.
Let's assume that the original quantity demanded was Q1 and the new quantity demanded is Q2.
According to the question,
Q2 = Q1 + (50/100)*Q1
Q2 = 1.5*Q1
Now, we can use the formula for price elasticity of demand to calculate the new price of the good.
Formula for price elasticity of demand
Price elasticity of demand = (% change in quantity demanded)/(% change in price)
We know that the price elasticity of demand for the good is -2.
-2 = (1.5Q1 - Q1)/(new price - Rs. 8)
Solving for the new price,
new price = Rs. 4
Conclusion
Therefore, the new price of the good is Rs. 4. This means that the consumer buys 50% more quantity of the good at a price of Rs. 4 per unit as compared to the original quantity at a price of Rs. 8 per unit.
Price elasticity of demand refers to the degree of responsiveness of the demand for a good to a change in its price. The value of price elasticity of demand can be positive, negative, or zero. A negative value of price elasticity of demand means that the demand for a good is inversely proportional to its price.
Given data and calculations
Here, the price elasticity of demand for the good is -2. This means that a 1% decrease in the price of the good will result in a 2% increase in the quantity demanded.
The consumer buys a certain quantity of the good at a price of Rs. 8 per unit. Now, when the price falls, the consumer buys 50% more quantity of the good.
Let's assume that the original quantity demanded was Q1 and the new quantity demanded is Q2.
According to the question,
Q2 = Q1 + (50/100)*Q1
Q2 = 1.5*Q1
Now, we can use the formula for price elasticity of demand to calculate the new price of the good.
Formula for price elasticity of demand
Price elasticity of demand = (% change in quantity demanded)/(% change in price)
We know that the price elasticity of demand for the good is -2.
-2 = (1.5Q1 - Q1)/(new price - Rs. 8)
Solving for the new price,
new price = Rs. 4
Conclusion
Therefore, the new price of the good is Rs. 4. This means that the consumer buys 50% more quantity of the good at a price of Rs. 4 per unit as compared to the original quantity at a price of Rs. 8 per unit.
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Price elasticity of demand for a good is -2 the consumer buys a certain quantity of of this good at a price of rupees 8 per unit when the price falls he buys 50% more quantity what is the new price?
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Price elasticity of demand for a good is -2 the consumer buys a certain quantity of of this good at a price of rupees 8 per unit when the price falls he buys 50% more quantity what is the new price? for Class 11 2024 is part of Class 11 preparation. The Question and answers have been prepared according to the Class 11 exam syllabus. Information about Price elasticity of demand for a good is -2 the consumer buys a certain quantity of of this good at a price of rupees 8 per unit when the price falls he buys 50% more quantity what is the new price? covers all topics & solutions for Class 11 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Price elasticity of demand for a good is -2 the consumer buys a certain quantity of of this good at a price of rupees 8 per unit when the price falls he buys 50% more quantity what is the new price?.
Price elasticity of demand for a good is -2 the consumer buys a certain quantity of of this good at a price of rupees 8 per unit when the price falls he buys 50% more quantity what is the new price? for Class 11 2024 is part of Class 11 preparation. The Question and answers have been prepared according to the Class 11 exam syllabus. Information about Price elasticity of demand for a good is -2 the consumer buys a certain quantity of of this good at a price of rupees 8 per unit when the price falls he buys 50% more quantity what is the new price? covers all topics & solutions for Class 11 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Price elasticity of demand for a good is -2 the consumer buys a certain quantity of of this good at a price of rupees 8 per unit when the price falls he buys 50% more quantity what is the new price?.
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