Answer to Question #184482 in Macroeconomics for HASAN

Question

Q1) Suppose the market demand for playing cards is given by the equation

Q = 600 – 100P

Where Q is the no. of decks of cards demand each year and P is the price in Rupee. For a price increase from Rs. 2 to Rs. 3 per deck, what is the price elasticity?

Answer 1

find Q :

P=2

$Q = 600 - 100\times P=600 - 100\times 2=400$

P=3

$Q = 600 - 100\times P=600 - 100\times 3=300$

price elasticity

$E(DP)=\frac{\%\Delta Q}{\%\Delta P}=\frac{-25}{50}=-0.5$

$\%\Delta Q=\frac{300-400}{400}\times100=-25$

$\%\Delta P=\frac{3-2}{2}\times100=50$