Price elasticity of demand of a commodity is – 0.5. Its quantity demanded falls by 5 units when its price rises by Rs1/unit. Calculate the quantity demanded if the price before the change is Rs. 5/unit.

If the price elasticity of demand (PED) is -0.5, and the price increases by 1%, the quantity demanded will decrease by 0.5%.

If the initial price was 5 and it rises by 1, it means that this price change represents a 20% increase. A 20% increase in price will result in a 10% decrease in quantity demanded. If 10% of quantity demanded = 5 units, total demand = (5 x 10) - 5 = 45 units.

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