The price elasticity of demand for widgets is 1.1 and the quantity demanded is 5,000 units. The price increases by 8%. What is the new quantity demanded?
_440
_4,560
_5,440
_4,780
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= 4560 is the new quantity demanded
1.1 (8%) = 0.088
5000 - (5000*0.088)
5000 - 440 = 4560
There is an inverse relationship between price and demand. Thus, if the price increases, demand decreases.
(Change in demand)/(change in price) = price elasticity on demand
x/8% = 1.1
x = 8.8%
There will be an 8.8% decrease in demand.
5000 - (5000*0.088) = 4560
New quantity demanded = 4560 widgets