Answer to Question #84510 in Economics of Enterprise for Joseph Abeda

Question

if the price of goods X falls from 55.00 to 54.60 and the demand increases from 1700 units to 2000 units , what would be the price elasticity of demand ?

Answer 1

If the price of goods X falls from 55.00 to 54.60 and the demand increases from 1700 units to 2000 units, then the price elasticity of demand is:

Ed = (2000 - 1700)/(54.6 - 55)*(54.6 + 55)/(2000 + 1700) = 300/(-0.4)*109.6/3700 = -22.22, so the demand is elastic.