ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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0.33
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3
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7.5
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8.98
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-8.98
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Detailed explanation-1: -At the $10dollar sign, 10 people bought 100 jars of spicy sauce. At the $12dollar sign, 12 people bought 40 jars of spicy sauce. Therefore, the price elasticity of demand for spicy sauce is 0.8.
Detailed explanation-2: -The average values for quantity and price are used so that the elasticity will be the same whether calculated going from lower price to higher price or from higher price to lower price. For example, going from $8 to $10 is a 25% increase in price, but going from $10 to $8 is only a 20% decrease in price.
Detailed explanation-3: -Demand is said to be price elastic when the value of price elasticity is greater than one. Here, the given percentage change in quantity demanded is 15, while the given percentage change in price is 10 implying that the price elasticity of demand is 1.5.
Detailed explanation-4: -Price Elasticity of Demand = Percentage change in quantity / Percentage change in price. Price Elasticity of Demand =-15% รท 60%
Detailed explanation-5: -The price elasticity of demand at $80 will be-0.4 and at $100 will be-0.556.