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Price of a commodity falls by Rs.2per unit its quantity demand increase by 10 unit. If price elasticity is -2. Calculate the quantity demand. If price before Change was Rs.10 per unit?
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Price of a commodity falls by Rs.2per unit its quantity demand increas...
Understanding Price Elasticity of Demand
Price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price. It is calculated using the formula:
Price Elasticity of Demand (PED) = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
Given that the price elasticity is -2, we can interpret this as follows:
- A 1% decrease in price leads to a 2% increase in quantity demanded.
Initial Price and Quantity Changes
- Initial Price: Rs. 10 per unit
- Price Change: Rs. 2 drop, leading to a new price of Rs. 8 per unit
- Quantity Demand Increase: 10 units
Calculating the Initial Quantity Demanded
1. Calculating Percentage Change in Price:
- Initial Price = Rs. 10
- New Price = Rs. 8
- Price Change = Rs. 10 - Rs. 8 = Rs. 2
Percentage Change in Price = (Price Change / Initial Price) * 100 = (2 / 10) * 100 = 20%
2. Using Price Elasticity:
Since PED = -2 and represents a 20% change in price, we can find the percentage change in quantity demanded:
-2 = (Percentage Change in Quantity Demanded) / (-20)
Thus, the Percentage Change in Quantity Demanded = 2 * 20 = 40%
3. Calculating Quantity Demanded:
If the quantity demanded increases by 40%, we can set up the following:
- Increase in Quantity = 10 units
- Let Initial Quantity Demanded = Q
Therefore, 40% of Q = 10
Q = 10 / 0.4 = 25 units
Conclusion
- Initial Quantity Demanded: 25 units
- Final Quantity Demanded after Price Drop: 25 + 10 = 35 units
Thus, the quantity demanded at the new price of Rs. 8 per unit is 35 units.
Price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price. It is calculated using the formula:
Price Elasticity of Demand (PED) = (Percentage Change in Quantity Demanded) / (Percentage Change in Price)
Given that the price elasticity is -2, we can interpret this as follows:
- A 1% decrease in price leads to a 2% increase in quantity demanded.
Initial Price and Quantity Changes
- Initial Price: Rs. 10 per unit
- Price Change: Rs. 2 drop, leading to a new price of Rs. 8 per unit
- Quantity Demand Increase: 10 units
Calculating the Initial Quantity Demanded
1. Calculating Percentage Change in Price:
- Initial Price = Rs. 10
- New Price = Rs. 8
- Price Change = Rs. 10 - Rs. 8 = Rs. 2
Percentage Change in Price = (Price Change / Initial Price) * 100 = (2 / 10) * 100 = 20%
2. Using Price Elasticity:
Since PED = -2 and represents a 20% change in price, we can find the percentage change in quantity demanded:
-2 = (Percentage Change in Quantity Demanded) / (-20)
Thus, the Percentage Change in Quantity Demanded = 2 * 20 = 40%
3. Calculating Quantity Demanded:
If the quantity demanded increases by 40%, we can set up the following:
- Increase in Quantity = 10 units
- Let Initial Quantity Demanded = Q
Therefore, 40% of Q = 10
Q = 10 / 0.4 = 25 units
Conclusion
- Initial Quantity Demanded: 25 units
- Final Quantity Demanded after Price Drop: 25 + 10 = 35 units
Thus, the quantity demanded at the new price of Rs. 8 per unit is 35 units.
Community Answer
Price of a commodity falls by Rs.2per unit its quantity demand increas...
Quantity Demand = 25 units.
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Price of a commodity falls by Rs.2per unit its quantity demand increase by 10 unit. If price elasticity is -2. Calculate the quantity demand. If price before Change was Rs.10 per unit?
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Price of a commodity falls by Rs.2per unit its quantity demand increase by 10 unit. If price elasticity is -2. Calculate the quantity demand. If price before Change was Rs.10 per unit? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Price of a commodity falls by Rs.2per unit its quantity demand increase by 10 unit. If price elasticity is -2. Calculate the quantity demand. If price before Change was Rs.10 per unit? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Price of a commodity falls by Rs.2per unit its quantity demand increase by 10 unit. If price elasticity is -2. Calculate the quantity demand. If price before Change was Rs.10 per unit?.
Price of a commodity falls by Rs.2per unit its quantity demand increase by 10 unit. If price elasticity is -2. Calculate the quantity demand. If price before Change was Rs.10 per unit? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Price of a commodity falls by Rs.2per unit its quantity demand increase by 10 unit. If price elasticity is -2. Calculate the quantity demand. If price before Change was Rs.10 per unit? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Price of a commodity falls by Rs.2per unit its quantity demand increase by 10 unit. If price elasticity is -2. Calculate the quantity demand. If price before Change was Rs.10 per unit?.
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