This question already has an answer here:
So I was having a bit of trouble reasoning with the answer for this particular PED question. It goes like this:
PED=1, Quantity Demanded=4,000 units when Price=$12
The question was:
Find the price when Quantity Demanded=20,000 units
So I tried the easy way to do this which was to use the price in which the Total Revenue remained the same, and I got the answer Final Price= $2.4.
My problem was that I tried another method and I am not getting the answer and I want to know why .
So PED= % Change in QD/ % Change in Price
We can see that the increase in Quantity Demanded is 400%. Shouldn't it stand to reason that the decrease in Price is also 400% (I know this is impossible because a price can't fall by more than what it is at the moment) but isn't the theory that the % fall in price will equal to and be offset by the % increase in QD, resulting in the revenue remaining the same?
I'm sorry if this question was unnecessarily long or even confusing, it's a bit difficult to understand my own thoughts so writing them out in paragraphs helps me understand why I'm asking this question in the first place ;).