Question

Question 5 Use the endpoint method to compute the price elasticity on D1 $10 $5 0. Di 80 90 100 From point B to point A, the percent change in price is

Answer 1

ENDPOINT PRICE ELASTICITY OF DEMAND-

It is calculated using the formula-

$=\frac{New quantity-Old Quantity}{Old Quantity}*\frac{Old Price}{New Price - Old Price}$

$=\frac{80-100}{100}*\frac{5}{10 - 5}$

$=\frac{-1}{4}$

$=-0.25$

Hence the price elasticity using endpoint method is -0.25.

From point B to A, the percentage change in price is-

$=\frac{New Price- Old Price}{Old Price}*100$

$=\frac{5-10}{10}*100$

$=\frac{-5}{10}*100$

$=-50$

Therefore the percentage change in price is -50%.

(Note- Since the change of price is from point B to A, the old price will be treated that of B i.e. $10 and the new price will be that of A i.e.$5)

(If it was A to B, it the percentage change would have been (10-5/5 *100) or 100%)