Suppose that legalizing the use of
heroinheroin
would decrease its price by
8181
percent. If the price elasticity of demand for
heroinheroin
is
-2.502.50,
what would be the percentage increase in the quantity of
heroinheroin
demanded from legalizing
heroinheroin?
nothing
percent. (Enter a numeric response using a real number rounded to two decimal places.)
Suppose instead that the price elasticity of demand for
heroinheroin
is
-0.240.24.
What would be the percentage increase in the quantity of
heroinheroin
demanded from legalizing
heroinheroin?
nothing
percent
(enter
your response rounded to two decimal
places).
The higher the absolute value of the price elasticity of demand for
heroinheroin,
the
▼
less
greater
the increase in
heroinheroin
use that would result from legalization.
Homework Answers
Given-Price elasticity = -2.50, Percentage change in price= - 81% ( negative because price has decreased)
Price elasticity = Percentage change in quantity demanded / Percentage change in price
-2.50 = Percentage change in quantity demanded / ( -81)
Percentage change in quantity demanded= -2.50 x -81
Percentage increase in quantity demanded= 202.5%
Given- Price elasticity = -0.24, Percentage change in price= - 81% ( negative because price has decreased)
Price elasticity = Percentage change in quantity demanded / Percentage change in price
-0.24 = Percentage change in quantity demanded / ( -81)
Percentage change in quantity demanded= -0.24 x -81
Percentage increase in quantity demanded= 19.44 %
The higher the absolute value of the price elasticity of demand for heroin, the greater the increase in heroin use that would result from legalization.
As we can see that greater the absolute value of price elasticity, greater is the increase in use of heroin. When price ealsticity is 2.50( absolute value) , the increase in quantity demanded of heroin is more as compared to when price elasticity is 0.24( absolute value).
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