question_answer

Price elasticity of demand of a good is (-) 1. When its price per unit falls by one rupee, its demand rises from 16 to 18 units. Calculate the price before change.

Answer:

Given,

\[{{Q}_{1}}=16\]

\[{{Q}_{2}}=18\]

\[\Delta P=-1\]

We know,          \[\Delta Q={{Q}_{2}}-{{Q}_{1}}=1816=2\]

\[{{E}_{d}}=\frac{\Delta Q}{Q}\,\,\times \,\,\frac{P}{\Delta P}\]

\[-1=\frac{2}{16}\,\,\times \,\,\frac{P}{(-1)}\]

\[-1=\frac{(-P)}{8}\]

\[P=8\]

Therefore, price before change is Rs. 8