Price elasticity of demand is (-1), at a given price the consumer buys 60 units of the good. How many units will the consumer buy if the price falls by 10%:

Economics
Price elasticity of demand is (-1), at a given price the consumer buys 60 units of the good. How many units will the consumer buy if the price falls by 10%:

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Answer

66 units66 \text{ units}

Step 1: Identify the given values. Price elasticity of demand (PED) is given as 1-1. Initial quantity demanded (Q1Q_1) is 60 units. The price falls by 10%10\%, so the percentage change in price (%ΔP\% \Delta P) is 10%-10\%.

Step 2: Use the price elasticity of demand formula to find the percentage change in quantity demanded. The formula for price elasticity of demand is: PED=%changeinquantitydemanded%changeinpricePED = \frac{\% change in quantity demanded}{\% change in price} Substitute the given values into the formula: 1=%changeinquantitydemanded10%-1 = \frac{\% change in quantity demanded}{-10\%} Now, solve for the percentage change in quantity demanded (%ΔQ\% \Delta Q): %ΔQ=1×(10%)=10%\% \Delta Q = -1 \times (-10\%) = 10\%

Step 3: Calculate the new quantity demanded. A 10%10\% increase in quantity demanded means the quantity will increase by 10%10\% of the initial quantity. Increase in quantity = 10%10\% of 6060 units Increaseinquantity=0.10×60=6unitsIncrease in quantity = 0.10 \times 60 = 6 units The new quantity demanded (Q2Q_2) is the initial quantity plus the increase: Q2=Q1+Increaseinquantity=60+6=66unitsQ_2 = Q_1 + Increase in quantity = 60 + 6 = 66 units The consumer will buy 66units\boxed{66 units}.

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