Question

apter 6 Homework Saved 1 The data below represent a demand schedule. Product Price $50 40 Quantity Demanded 5 nts eBook 30 20 15 25 35 45 Print 10 ferences Determine the price elasticity of demand between each of the following prices: Instructions: Round your answers to 2 decimal places. Enter your answers as positive values (absolute values), a. Between A = $50 and P2 = $40. Ed- b. Between P,= $40 and P2 - $30. E- Prev 1 of 10 !!! Next > w here to search

Answer 1

Price Elasticity of Demand (Ed) % change in Quantity Demanded (AQ) % change in Price (AP)

a.

P1 = $50

P2 = $40

D1 = 5

D2 = 15

ΔP = P2 – P1

      = $(40-50)

      = - $10

%ΔP = (P2 – P1) / P1

           = - $10 / $50

            = - 0.20 or -20%

ΔD = D2 – D1

      = (15 - 5)

      = 10

%ΔD = (D1 – D2) / D1

           = 10 / 5

            = 2 or 200%

Ed = %ΔD / %ΔP

     = 2 / -0.20

     = -10 or 10

(Remember price elasticity of demand is always negative as when price falls demand increases. The –ve sign can be ignored for if you want.)

b.

P1 = $40

P2 = $30

D1 = 15

D2 = 25

ΔP = P2 – P1

      = $(30-40)

      = - $10

%ΔP = (P2 – P1) / P1

           = - $10 / $40

            = - 0.25 or -25%

ΔD = D2 – D1

      = (25 - 15)

      = 10

%ΔD = (D1 – D2) / D1

           = 10 / 15

            = 0.67 or 67.67%

Ed = %ΔD / %ΔP

     = 0.67 / -0.25

     = -2.68 or 2.68

(Remember price elasticity of demand is always negative as when price falls demand increases. The –ve sign can be ignored for if you want.)

c.

P1 = $30

P2 = $20

D1 = 25

D2 = 35

ΔP = P2 – P1

      = $(20-30)

      = - $10

%ΔP = (P2 – P1) / P1

           = - $10 / $30

            = - 0.33 or -33.33%

ΔD = D2 – D1

      = (35 - 25)

      = 10

%ΔD = (D1 – D2) / D1

           = 10 / 25

            = 0.40 or 40%

Ed = %ΔD / %ΔP

     = 0.40 / -0.33

     = -1.21 or 1.21

(Remember price elasticity of demand is always negative as when price falls demand increases. The –ve sign can be ignored for if you want.)

d.

P1 = $20

P2 = $10

D1 = 45

D2 = 35

ΔP = P2 – P1

      = $(10-20)

      = - $10

%ΔP = (P2 – P1) / P1

           = - $10 / $20

            = - 0.50 or -50%

ΔD = D2 – D1

      = (45 - 35)

      = 10

%ΔD = (D1 – D2) / D1

           = 10 / 35

            = 0.2857 or 28.57%

Ed = %ΔD / %ΔP

     = 0.2857 / -0.50

     = -0.57 or 0.57

(Remember price elasticity of demand is always negative as when price falls demand increases. The –ve sign can be ignored for if you want.)