When price rises from $10 to $15, the quantity demanded decreases from 100 to 70. Calculate...

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Answer 1

Answer #1

Price elasticity of demand Ed = Percentage change in quantity demanded/percentage change in price

Q1	100
Q2	70
Percentage change in quantity demanded	(Q2-Q1)/(Q1+Q2)/2
Percentage change in quantity demanded	(70-100)/85
Percentage change in quantity demanded	(-30)/85
Percentage change in quantity demanded	-35%

P1	10
P2	15
Percentage change in price	(P2-P1)/(P1+P2)/2
Percentage change in price	(15-10)/12.5
Percentage change in price	(5/12.5)
Percentage change in price	40%

Price elasticity of demand	35/40
Price elasticity of demand	0.875

The price elasticity of demand is equal to .875.

Answer 2

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