Price Elasticity of Demand of a good is (-)l. The consumer .spends ? 50 on the good at the prevailing price. When price changes, he buys 25 units. What is the new price? Use the total expenditure method of calculating Price Elasticity of Demand to answer this question.
Given, ${{E}_{d}}$ = {~) 1
In this case, when Elasticity of Demand is (-)l, total expenditure will remain constant.
Total expenditure (given) = Rs 50
Total expenditure does not change] .When quantity is 25 units,
Price = TE / Q= 50 /25 = Rs 2 per unit