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Question
A consumer buys 200 units of a good at a price of Rs 20 per unit. Price elasticity of deamnd is (–) 2. At what price will he be willing to purchase 300 units? Calculate.
Solution
\[Ed = \frac{\% \Delta Qd}{\% \Delta P}\]
\[ - 2 = \frac{\frac{300 - 200}{200}}{\frac{x - 20}{20}}\]
\[ - 2 = \frac{1}{2} \times \frac{20}{x - 20}\]
\[ - 2 + 40 = 10\]
\[ x = \frac{30}{2}\]
\[ x = 15\]
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