Question

If the price declines from $400 to $300 and, as a result, quantity demanded increases from 1100 to 1400, elasticity of demand is: a) 1.78 b) 0.92 c) 1.12 d) 3.42

Answer 1

400×300÷1100×-100=-1.09

Answer 2

The formula for elasticity of demand is as follows :

Elasticity = (ΔQ/Q) / (ΔP/P)

Where :

Q = Quantity demanded

P= Price

ΔQ = 1400 - 1100 = 300

Q = 1400 + 1100 = 2500

ΔQ/Q = 300/2500 = 0.12

ΔP = 300 - 00 = -100

P = 300 + 400 = 700

ΔP/P = -100/700 =  -1/7

Elasticity = 0.12 ÷ (-1/7)

= 0.12 × -7 = -0.84