The current price for a good is 25 and 100 units are demande

The current price for a good is $25, and 100 units are demanded at that price. The price elasticity of demand for the good is 1.5. by $ 102.00. (Enter your When the price of the good drops by 4 percent to $24, consumer surplus increases response to the nearest penny.)

Solution

Old consumer is $25 x 100 units = $2500

new consumer surplus

$24 x $106=$2544

The consumer surplus increases by $2544-$2500=$44

New quantity:

Since the price elasticity of demand for good is -1.5, it means the demand is elastic as it is greater than 1.

For one percent change in price, quantity demanded will increase by 1.5%

If the price drops by 4%, quantity demanded will increase by 6% (1.5% x 4%), therefore, the new quantity is 106 (6% of 100).