Answer to Question #106814 in Microeconomics for Steve

Question

Marula enterprises has developed a new local brew called Stiff Neck. The market demand for this product is given as follows: Q=240-4P. If stick Neck is priced at 40$, what is the point elasticity of demand?

Answer 1

$Ep=Q'(P)×\frac{P1}{Q1};$

$Q'(P)=-4$

$Q1$ $=240-4×40;$

$Q1=240-160;$

$Q1=80;$

$P1=40;$

at a price of $ 40, demand is $ 80.

$Ep=-4×40/80=-2$ %;