Question

The quantity demanded of a commodity at a price of Rs 10 per unit is 40 units. Its price elasticity of demand is -2. The price falls by Rs 2 per unit. Calculate the quantity demanded at the new price.

Answer 1

Given P₀ = Rs 10

Q₀ = 40

E_d = -2

∆P = – Rs 2 

Therefore, P₁ = Rs 8

We know,

According to the law of demand, quantity demanded falls with a rise in price and vice-versa, ceteris paribus.

Q₁ = Q₀ + ∆Q = 40 + 16 = 56 units.

Quantity demanded at the new price is 56 units.