Calculate the price elasticity of demand, if there is a decline in quantity from 55 to 45 a
week and an increase in price from $12 to $20.
Using the arc elasticity formula below:
Price elasticity of demend=Q2−Q1Q1+Q22P2−P1P1+P22\text{Price elasticity of demend}=\dfrac{\dfrac{Q_2-Q_1}{\dfrac{Q_1+Q_2}{2}}}{{\dfrac{P_2-P_1}{\dfrac{P_1+P_2}{2}}}}Price elasticity of demend=2P1+P2P2−P12Q1+Q2Q2−Q1
Price elasticity of demend=45−5545+55220−1220+122\text{Price elasticity of demend}=\dfrac{\dfrac{45-55}{\dfrac{45+55}{2}}}{{\dfrac{20-12}{\dfrac{20+12}{2}}}}Price elasticity of demend=220+1220−12245+5545−55
Price elasticity of demend=−0.4\text{Price elasticity of demend}=\blue{-0.4}Price elasticity of demend=−0.4
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