The coefficient of price elasticity of demand for a commodity is 0.2. When price was rs.10 per unit the quantity demanded was 40 units . if the price falls to rs 5 per unit how.much will be its quantity demanded?
ΔP = 5-10 = (-) Rs. 5
ED = (ΔQ / ΔP) * (P/Q)
ΔQ = (ED*ΔP*Q) / P = {(-0.2)*(-5)*40} / 5 = 8 units
Q1 = Q + ΔQ = 40 + 8 = 48 units
ED = (ΔQ / ΔP) * (P/Q)
ΔQ = (ED*ΔP*Q) / P = {(-0.2)*(-5)*40} / 5 = 8 units
Q1 = Q + ΔQ = 40 + 8 = 48 units