Question

The data below represent a demand schedule. Quantity Demanded Product Price $50 10 15 20 20 1025 Determine the price elasticity of demand between each of the following prices: Instructions: Round your answers to 2 decimal places. Enter your answers as pos a. Between P1 = $50 and P2 = $40. Ed= b. Between P1 = $40 and P2 = $30, Ed= c. Between P1 = $30 and P2 = $20, Ed= d. Between P1 = $20 and P2 = $10, Ed=L

Answer 1

Price elasticity of demand = (-) Percentage change in Quantity Demanded / Percentage change in Price

(a) Between P1 = $50, P2 = $40, Q1 = 5, Q2 = 10.

Percentage change in quantity demanded = (10-5)/5*100 = 100%

Percentage change in price = (40-50)/50*100 = - 20%

Price elasticity of demand = (-) 100/-20 = 5

Ed = 5

(b) Between P1 = $40, P2 = $30, Q1 = 10, Q2 = 15.

Percentage change in quantity demanded = (15-10)/10*100 = 50%

Percentage change in price = (30-40)/40*100 = - 25%

Price elasticity of demand = (-) 50/-25 = 2

Ed = 2

(c) Between P1 = $30, P2 = $20, Q1 = 15, Q2 = 20.

Percentage change in quantity demanded = (20-15)/15*100 = 33.33%

Percentage change in price = (20-30)/30*100 = - 33.33%

Price elasticity of demand = (-) 33.33/-33.33 = 1

Ed = 1

(d) Between P1 = $20, P2 = $10, Q1 = 20, Q2 = 25.

Percentage change in quantity demanded = (25-20)/20 *100 = 25%

Percentage change in price = (10-20)/20*100 = - 50%

Price elasticity of demand = (-) 25/-50 = 0.5

Ed = 0.5