To determine how the individual's demand for the good will change when the price increases from 5 to 7 per unit, you can use the concept of price elasticity of demand (PED). The formula for PED is:

PED = (% Change in Quantity Demanded) / (% Change in Price)

In this case, we know the price increased from 5 to 7, which is a 40% increase:

% Change in Price = [(New Price - Old Price) / Old Price] x 100% % Change in Price = [(7 - 5) / 5] x 100% = (2 / 5) x 100% = 40%

Now, you are given that the elasticity of demand for the good is 0.5. PED is always a negative value, so we use its absolute value to determine the responsiveness of demand. A PED of 0.5 indicates inelastic demand, meaning the demand is relatively unresponsive to price changes.

To determine the change in quantity demanded, we can use the formula:

% Change in Quantity Demanded = PED x % Change in Price

% Change in Quantity Demanded = 0.5 x 40% = 20%

Since PED is less than 1 (elastic demand), a 40% increase in price will result in a 20% decrease in quantity demanded.

So, the individual will reduce their demand for the good when the price increases from 5 to 7 per unit.

The correct answer is:

1. Reduce his demand