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Question
The price of a good decreases from ₹100 to 80 per unit. If the price elasticity of demand for the good is 2 and the original quantity demanded is 30 units, calculate the new quantity demanded.
Solution
P1 = 100, P2 = 80
Change in price
(ΔP) = 100 - 80 = ₹20
Ed = 2
Q1 = 30 units.
Ed = `(ΔQ)/Q_1 xx P_1/(ΔP)`
2 = `(ΔQ)/30 xx 100/20`
12 = ΔQ
Q2 = Q1 + ΔQ
= 30 + 12
= 42 units.
The new quantity purchased at a reduced price will be 42 units.
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