Question

At price of र 4 per unit a consumer buys 50 units of a goods. The price elasticity of demand is -2. How many units will the consumer buy at र 3 per unit?

Solution

eD equals fraction numerator increment straight q over denominator increment straight p end fraction cross times straight p over straight q minus 2 equals fraction numerator increment space straight q over denominator negative 1 left parenthesis equals 3 minus 4 right parenthesis end fraction cross times 4 over 50 or space space space increment straight q equals 2 cross times 50 over 4 equals 25

The consumer will buy 75 (= 50 + 25) units.

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