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Price elasticity of demand of a good is (-) 1. The consumer buys 50 units of that good when price is Rs.2 per unit. How many units will he buy if the price rises to Rs.4 per unit? Answer this question with the help of total expenditure method of determining price elasticity of demand. |
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Answer»
Given, Ed= -1. In this case, when elasticity of demand is (-)1, total expenditure will remain constant. Total Expenditure (TE) =2 x 50 = Rs.100 TE does not change When prices is Rs.4 per unit Quantity demanded = 100/4 = 25 unit |
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