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When the price of a good X is Rs. 5, the consumer buys 100 units of the good X. At what price would he be willing to purchase 140 units of good X ? The price elasticity of demand for good X is 2. |
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Answer» Solution :`{:("Original Quantity (Q) = 100 unitsOriginal Price (P) = Rs. 5"),("New Quantity "(Q_(1))=140 " unitsNew Price "(P_(1))=?),("Change in Quantity "(Delta Q)=40 " unitsChange in Price "(Delta P)=?),("ELASTICITY of Demand (ED) = 2"):}` Price Elasticity of demand `(ED)=(Delta Q)/(Delta P)XX(P)/(Q)` `2=(40)/(Delta P)xx(5)/(100)=Delta P=Rs. 1` As the quantity demanded is increasing, price will decrease. It means that New Price = Original Price (P) - Change in Price `(Delta P)=5-1=Rs. 4` New Price = Rs. 4. |
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