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

Question

Question

Answer 1

Answer #1

ANSWER:

Price elasticity of demand = % change in quantity demanded / % change in price

% change in quantity demanded = (q2 - q1) / (q2 + q1) / 2 = (70 - 100) / (70 + 100) / 2 = -30 / 85 = - 6 / 17

% change in price = (p2 - p1) / (p2 + p1) / 2 = (15 - 10) / (15 + 10) / 2 = 5 / 12.5 = 2 / 5

Price elasticity of demand = - 6 / 17 / 2 / 5 = -0.88235

so the price elasticity of demand is -0.88235

Answer 2

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