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Question
Price elasticity of demand of a good is (-) 1. Calculate the percentage change in price that will raise the demand from 20 units to 30 units.
Solution
Given that
`Q_1` = 20
`Q_2` = 30
`E_d `= -1
`ΔQ = Q_2 - Q_1 = 30 - 20 = 10`
We know that
`E_d = "% change in quantity demanded"/"% change in price"`
`-1 = ("ΔQ"/Q_1 xx 100)/"% change in price" = (10/20 xx 100)/"% change in p"`
`-1 = 50/"% change in price"`
% change in price = -50
Thus 50% fall in price will increase the demand from 20 units to 30 units.
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