ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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‑1/10.
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‑10.
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-7/3.
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-3/7.
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Detailed explanation-1: -Answer and Explanation: When the price of a product increases from $3 to $4, the quantity demanded decreases from 90 to 70. The price elasticity of demand is-0.67.
Detailed explanation-2: -The price elasticity of demand equals the percentage change in the quantity demanded divided by the percentage change in the price. The price increases from $3 to $5, an increase of $2 a DVD. The average price is $4 a DVD. So the percentage change in the price equals $2 divided by $4, which equals 50 percent.
Detailed explanation-3: -In the long run, a price increase from $2 to $4 has an elasticity of supply of 1.50.
Detailed explanation-4: -The price rises from $125 to $135 a pair. $125)/$130] × 100, which is 7.7 percent. The elasticity of supply equals (25.0 percent/7.7 percent), which is 3.25.