Finding the New Level of Quantity Demanded

Question

Consider the following hypothetical market. The equilibrium price is $10 and the equilibrium quantity is 20 units. The own-price elasticity of demand is -0.5 and the own-price elasticity of supply is 0.75. If price increases from $10 to $12, what will be the new level of quantity demanded? If necessary, round to the nearest two decimal points.

Answer 1

The elasticity of supply is irrelevant for this question. I presume there are additional parts of this question whre it may be relevant or your teacher is trying to bomabard your with stuff to see if you are reading the questio, The elasticity of demand is" inelastic" a 1% increase in price with lead to a 1/2% reduction in quantity demanded. raising price from 10 to 12 is a 20% Increase in Price Which results in a -.5*20% reduction in quantity demanded So quantity demand fall by 10%. The initial quantity demand was 20 "units" this falls by 10 percent or 2 units so that the new quantity will be 18 units