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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.
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