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Price Elasticity of Demand and Price per Unit

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Suppose that 50 units of a good are demanded at a price of $1 per unit. A reduction in price to $.20 results in an increase in quantity demanded to 70 units. Show that these data yielded a price elasticity of .25. By what percentage would a 10% rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve.

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Suppose that 50 units of a good are demanded at a price of $1 per unit. A reduction in price to $.20 results in an increase in ...

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  • MBA, California State University, Sacramento
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