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a) Given the following data, calculate price elasticity of demand for Product X                         Original Price:...

a) Given the following data, calculate price elasticity of demand for Product X

                        Original Price: $50

                        New Price: $58

                        Original Quantity: 1500 units

                        New Quantity 1350 units

            b) Is this good elastic or inelastic? Why?

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Answer #1

Solution -

Change in P

=(58-50)/50

= 0.16

Change in Q

=(1350-1500)/1500

= -0.1

Price Elasticity of Demand

= -0.1/.16

= -0.625

This is INELASTIC

Reason -

-0.625 < 1.

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