Suppose the quantity demanded of ski boats falls from 4.0 million to 3.0 million as a...
Suppose the quantity demanded of ski boats falls from 4.0 million to 3.0 million as a result of an average price increase from $20,000 to $25,000 per boat. The absolute value of the price elasticity of demand is closest to
A) 0.20.
B) 0.78.
C) 0.29.
D) 1.29
Homework Answers
P1 = $20,000
P2 = $25,000
Q1 = 4 million
Q2 = 3 million
Calculate the price elasticity of demand -
e = -1.285
Thus,
The absolute value of the price elasticity of demand is closest to 1.29
Hence, the correct answer is option (D).
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