If 20 units are sold at a price of US$50 and 30 units are sold at a price of US$40, what is the absolute value of the p...

Question

Question

If 20 units are sold at a price of US$50 and 30 units are sold at a price of US$40, what is the absolute value of the price e

Answer 1

Answer #1

Price elasticity of demand Ed = Percentage change in quantity demanded/percentage change in price

P1	50	Q1	20
P2	40	Q2	30

Percentage change in price				(P2-P1)/(P1+P2)/2
Percentage change in price				40-50/(40+50)/2
Percentage change in price				(-10/45)
Percentage change in price				-22%

Percentage change in quantity demanded				(Q2-Q1)/(Q1+Q2)/2
Percentage change in quantity demanded				30-20/(30+20)/2
Percentage change in quantity demanded				(10/25)
Percentage change in quantity demanded				40%

Price elasticity of demand = 40/(-22)
Price elasticity of demand = -1.81

The absolute value of price elasticity of demand is 1.8.

Answer 2

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