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 Show transcribed image text If

Answer 1

Price elasticity is the term used to denote the demand due to rise or fall in price fluctuations.

In fact, it plays an important role in tracking the change in requirement owing to change in price.

Therefore, for a cost modification from 400 dollars to 300 dollars, the demand escalates from 1100 to 1400. Hence one should calculate as follows: (400+300)/ (1100+1400) *(1400-1100)/(400-300)=1.4, therefore the demand is elastic.