Suppose a local bank increases the fees they charge for their bank accounts by 25 percent....

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Suppose a local bank increases the fees they charge for their bank accounts by 25 percent. In response, the demand for their

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Answer 1

Answer #1

Ans) Elasticity of demand = %change in quantity demanded ÷ %change in price

% change in quantity demanded using mid point formula = [(Q2-Q1)/[(Q2+Q1)/2]×100

= [(5,000 - 20,000)/(5000+20,000)/2]×100

= (-15,000/12,500)×100 = -120%

Elasticity = -120/25 = -4.8% (elastic demand)

Suppose a local bank increases the fees they charge for their bank accounts by 25 percent. In response, the demand for their

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Suppose a local bank increases the fees they charge for their bank accounts by 25 percent....

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