If the price rises from 10 pence to 12 pence and the price elasticity of demand is -0.5, what is the new quantity demanded given that the original quantity was 500 units?

Explanation

The price increased by 20% (from 10 to 12 pence). With a price elasticity of demand of -0.5, the quantity demanded will decrease by 10% (0.5 × 20%). Therefore, the new quantity demanded is 90% of 500 units, which equals 450 units.