Question

A consumer buy 200 units of a good at a price of Rs 20 per unit. Price elasticity of demand is `(-)2`. At what price will he be willing to purchase 300 units? Calculate

Answer 1

`E_(d) = (Delta Q)/(Delta P) xx (P)/(Q)`
`-2 = (100)/(Delta P) xx (20)/(200)`
`-2 (DeltaP) = 10`
`Delta P = -5`
New Price = Original Price `(P) + Delta P = 20 + (-) 5 = Rs 15`