Question
A consumer spends ₹ 80 on a commodity when price is ₹ 1 per unit. If the price increases by ₹ 1, what would be his expenditure. PED = -0.4?
| Initial Price (P) = 1 | Initial Expenditure = 80 | Initial Quantity (Q) $=\frac{\text{Exp.}}{\text{Price}}=80$ |
| New Price (P1) = 2 | New Expenditure = ? | New Quantity (Q1) = ? |
| $\Delta \text{P} = 1$ | $\Delta\text{Q} = ?$ |
$\text{PED}=\frac{\Delta\text{Q}}{\Delta\text{P}}\times\frac{\text{P}}{\text{Q}}$
$-0.4=\frac{\Delta\text{Q}}{1}\times\frac{1}{80}$
$-32=\Delta \text{Q}$
As New Price is increasing from 1 to 2, quantity demanded must decrease by $\Delta\text{Q}.$
New Quantity = Initial Quantity + $\Delta\text{Q}=80+(-32)=48$
At Price = 2, Quantity demanded = 48.
The Expenditure at this Price = P × Q = 2 × 48 = 96
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| Output (Units) | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| MC (₹) | 2000 | 1500 | 1200 | 1500 | 2000 | 2700 | 3500 |
OR
Why must Aggregate Demand be equal to Aggregate Supply at the equilibrium level of income and output? Explain with the help of a diagram.| Total Output (Units) | Total Cost (Rs) |
| 0 | 120 |
| 1 | 180 |
| 2 | 200 |
| 3 | 210 |
| 4 | 230 |
| 5 | 270 |
| 6 | 360 |