12th Class Economics Solved Paper - Economics Re-Examination 2018

  • question_answer
    A consumer buys 200 units of a good at a price of Rs. 20 per unit. Price elasticity of demand is\[(-)\,2\]. At what price will he be willing to purchase 300 units? Calculate.


    Original Price (P) = Rs. 20 per Unit
    Original Quantity (\[\theta \]) = 200 Units
    Elasticity of demand (\[{{E}_{d}}\]) = \[(-)\,2\]
    New Qty. (\[{{\theta }_{1}}\]) = 300 Units
    New Price (\[{{P}_{1}}\]) =?
    Change in Qty = New Qty. \[\] Original Qty
    (\[\Delta \theta \]) \[=300200\]
                = 100 Units
    New Price (\[{{P}_{1}}\]) = \[\Delta PP\](Change in Price\[\]Original Price)
    Utilizing the formula:
    \[{{E}_{d}}=\,\,\frac{\Delta \theta }{\Delta P}\,\,X\,\,\frac{P}{Q}\]
    \[{{E}_{d}}\] = Price elasticity of demand
    \[\Delta \theta \]= Change in Qty.
    \[\Delta P\]= Change in Price
     P = Original Price
     Q = Original Qty.
    Change in Qty (\[\theta \]) = New Qty.\[\]Original Qty.
       = 100 Units
    \[(-)\,2\] =\[\frac{100}{\Delta P}\,\,\times \,\,\frac{20}{200}\]
    \[(-2)\,\Delta P=10\]
    \[\therefore \]     \[(-2)\,\Delta P=\frac{10}{2}=5\]
    \[(-)\] sign is ignored since it tells only the inverse relationship between Price and Qty. demanded.
    New Price (\[{{P}_{1}}\])\[=P-\Delta P\]
                          \[=Rs.\text{ }20Rs.\text{ }5=Rs.\text{ }15\]
    Hence New Price (\[{{P}_{1}}\]) will be Rs. 15 at New Qty. of 300 units.                                       Ans. Rs. 15

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