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CMA Foundation · Fundamentals of Business Economics and Management · The Fundamentals of Economics

The demand schedule for a product of a Pune firm is: at ₹20 per unit, 100 units are demanded; at ₹25, 80 units; at ₹30, 60 units. If the demand is linear and follows the equation Q = a − bP, what is the quantity demanded at a price of ₹35?

The quantity demanded at ₹35 is 40 units. The schedule shows demand falling by 20 units for every ₹5 rise in price, so from 60 units at ₹30 the next ₹5 increase lowers it to 40 units, consistent with Q = 180 − 4P.

  1. A50 units
  2. B40 unitsCorrect
  3. C30 units
  4. D20 units

Explanation

Each ₹5 rise in price reduces quantity by 20 units, so b = 4 units per rupee. Starting from 60 units at ₹30, a further ₹5 rise to ₹35 reduces quantity by 20 to 40 units. Check: Q = 180 − 4P gives 180 − 140 = 40. Choosing 20 would wrongly drop 40 units for the ₹5 step.

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