Question

Consider the following equations: Qd = 31 - 3P and Qs = 6 + 2P, where Qd = quantity demanded and Qs = quantity supplied, P = price
Demand Schedule
Price Quantity demanded
$250 1500
$200 2100
$150 2700

"If price falls from $250 to $200, what is the elasticity of demand over this range?"

-1.5

-1

-0.08

-0.67

Answer 1

Answer:

Explanation:

We calculate equilibrium price by Qs=Qd

31-3P=6+2P

P=5

Now change in % demand from 1500 to 2100=

600/1500*100=40%

Now change in % price from 250 dollars to 200 dollars =

50/250*100= 20%

Demand elasticity measures the changes in quantity demanded with fluctuations in its price in the market.

Now elasticity= (delta Q*P)/delta P* Q= 600*250/(50*1500)= -2

Hence it is inelastic demand as with rise in price commodity demanded fallas and vice versa.