Homework Answers
a) When P=6, Demand = 80-5(6) = 50
When P=8, Demand = 80-5(8) = 40
Price elasticity of demand = [40-50/(40+50/2)] / [8-6/(8+6/2)] = [-10/45] / [2/7] = -0.2222/0.2857 = -0.78
b) When P=9, Demand = 80-5(9) = 35
Price elasticity of demand = [35-40/(35+40/2)] / [9-8/(9+8/2)] = [-5/37.5]/[1/8.5] = -0.1333/0.1176 = -1.13
No, the elasticity of demand is not constant because as price increases, the demand become more price elastic.
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