Answer:
the correct option is B) 4000 units.
Step-by-step explanation:
FORMULA FOR PRICE ELASTICITY = \frac{percentage \: change \: in \: quantity \: demanded}{percentage \: change \: in \: price}
Given - price elasticity = 2.0,
quantity demanded = 5000 units (old)
percentage change in price = 10%
2.0 = Percentage change in quantity demanded / 10%
Percentage change in quantity demanded = 10% x 2
= 20%
Percentage change in quantity demanded =
new quantity demanded - old quantity demanded
20% = new quantity demanded - 5000
new quantity demanded = 4000 units.
( 4000 / 5000 x 100 = 20% )
Another short way of understanding this is through the inverse relationship between price and quantity demanded. As it is given that the price is increased by 10% then according to law of demand we can say that the quantity demanded would decrease by 10% ( 5000 - 5000 x 10% = 4000)