The market demand for a good at Rs. 5 per unit is 50 units. Due to increase in price, the market demand falls to 30 units. Find out the new price if the price elasticity of demand is `(-)2`.

Explanation

`{:("Original Quantity (Q) = 50 units Original Price (P) = Rs. 5"),("New Quantity "(Q_(1))=30 " units New Price "(P_(1))=?),("Change in Quantity "(Delta Q)=-20 " units Change in Price "(Delta P)=Delta P),(" Elasticity of Demand (ED) = "(-)2):}`
Price Elasticity of demand (ED) `=(Delta Q)/(Delta P)xx(P)/(Q)`
`-2=(-20)/(Delta P)xx(5)/(50)=Delta P=Rs. 1`
As the quantity demanded is decreasing, price will increase. It means,
New Price = Original Price (P) + Change in Price `(Delta P) = 5+1=Rs. 6`
New Price = Rs. 6