Question

1. Block's sells 500 bottles of perfume a month when the price is $7. A huge increase in resource costs causes price to rise to $9 and Block's only manages to sell 460 bottles of perfume. The price elasticity of demand is:

Answer 1

The change in quantity is:$=\frac {(500-460)} {(500+460)}=0.0417$

The change in price;

$=\frac {(7 - 9)}{(7+9)}=0.125$

Elasticity of Demand then ;$=\frac {0.0417}{0.125}=0.33$