Suppose the per-unit price of a product changes from $105 to $95 and the quantity demanded...
Suppose the per-unit price of a product changes from $105 to $95 and the quantity demanded changes from 9,500 units to 10,500 units. The absolute value for the price elasticity of demand for this product equals _____.
a. 1.5
b. 1
c. ∞
d. 0.5
Homework Answers
Price elasticity of demand = [(q2-q1)/((q2+q1)/2)] / [(p2-p1)/((p2+p1)/2)]
Price elasticity of demand = [(10500-9500)/((10500+9500)/2)] / [(95-105)/((95+105)/2)]
= [1000 / 10000] / [-10 / 100]
= 0.1 / - 0.1
= -1
Absolute value of Price elasticity of demand = 1
option b is correct answer
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