Price elasticity of demand of a good is (-)2. The consumer buys a certain quantity of this good at a price of Rs. 8 per unit . When the price falls he buys 50 percent more quantity . What is the new price ?

Explanation

`E_(P)=(% "change in " Q_(d))/(% " change in P")`
`(-)2=(50%)/(% " change in P")`
`%` Change in P `=(50)/(-2)=-25%`
New `P=P+%` change in P
`=8+(-25% " change of " 8) =8-2=Rs.6` per unit.