Question

Price elasticity of demand of a good is (-)1. At a given price the consumer buys 60 units of the good. How many units will the consumer buy if price falls by 10%?

Solution

eD equals fraction numerator % space Change space in space demand over denominator % space Change space in space price end fraction minus 1 equals fraction numerator % space Change space in space demand over denominator negative 10 % end fraction

10% = Percent change in demand
Demand after fall in price = q(original damand) + 10% of q
= 60 + 6 = 66 units

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