Question

In a local market, the monthly price of Internet access service decreases from S35 to $25, and the total quantity of monthly accounts across all Internet access providers increases from 150,000 to 250,000 What is the value price elasticity of demand, expressed as a positive number?(Round your answer to two decimal places)

Answer 1

$\large Elasticity, e = \frac{\% \triangle Q}{\% \triangle P}$

$\LARGE e = \frac{\frac{Q_2-Q_1}{\frac{Q_2+Q_1}{2}}}{\frac{P_2-P_1}{\frac{P_2+P_1}{2}}}$

Given, Q1 = 150,000 , Q2 = 250,000

P1 = $35 , P2 = $ 25

Plug in these values in the equation we get

$\LARGE e = \frac{\frac{250000-150000}{\frac{250000+150000}{2}}}{\frac{25-35}{\frac{25+35}{2}}}$

$\LARGE e = \frac{\frac{100000}{\frac{400000}{2}}}{\frac{-10}{\frac{60}{2}}}$

$\LARGE e = \frac{\frac{100000}{200000}}{\frac{-10}{30}}$

$\large e =- \frac{100000*30}{200000*10}$

$\large e =- \frac{3}{2} = - 1.5$

Price Elasticity of demand = 1.50

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