Question

calculate the price elasticity of demand,if there is a decline in quantity from 55 to 45 a week and an increase in price from $12 to $20.
​

Answer 1

Answer:

The price elasticity of demand is calculated as the percentage change in quantity divided by the percentage change in price. Therefore, the elasticity of demand between these two points is 6.9%−15.4% which is 0.45, an amount smaller than one, showing that the demand is inelastic .

Explanation:

Inelastic demand occurs when changes in price cause a disproportionately small change in quantity demanded. For example, a good with inelastic demand might see its price increase by 30%, but demand drop by only 10% as a result.Ped is between 0 and 1 (i.e. the % change in demand from A to B is smaller than the percentage change in price), then demand is inelastic. If Ped = 1 (i.e. the % change in demand is exactly the same as the % change in price), then demand is unit elastic.