Consider a market described by the linear demand curve q = 8 − 2p. (e) Compute...
Consider a market described by the linear demand curve q = 8 −
2p.
(e) Compute the price elasticity of demand at the prices p = 3, p =
2, and p = 1.
At which of these prices is demand elastic / inelastic / unit-elastic?
Homework Answers
Answer
Now, doing one by one for the prices provided
p=3
q=8-2*3=2
The demand is elastic as the elasticity is below -1.
=========
p=2, q=8-2*2=4
the demand is unit elastic as the elasticity is equal to -1.
==========
the demand is inelastic as the elasticity is above -1.
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