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A consumer spends Rs. 80 on a commodity when price is Rs. 1 per unit. If the price increases by Rs. 1, what would be his expenditure. PED =-0.4 ? |
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Answer» SOLUTION :`{:("Initial Price (P) = 1","Initial Expenditure = 80","Initial Quantity (Q) "=("Exp.")/("Price")=80),("NEW Price "(P_(1))=2,"New Expenditure = ?","New Quantity "(Q_(1))=?),(Delta P=1,,Delta Q=?):}` `PED =(Delta Q)/(Delta P)xx(P)/(Q) "or" -0.4=(Delta Q)/(1)xx(1)/(80)` `-32=Delta Q` As New Price is increasing from 1 to 2, quantity demanded must decrease by `Delta Q`. New Quantity = Initial Quantity `+Delta Q=80+(-32)=48` At Price = 2, Quantity demanded = 48. The Expenditure at this Price `= P xx Q=2xx48=96` |
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