Answer to Question #169210 in Microeconomics for Ishaan

Question

The number of sales per week of an $80 pair of jeans is 25. The number of weekly sales goes

up to 45 when the price is reduced by 30%.

(a) Find the percentage change in demand.

(b) Find the average elasticity of demand.

Answer 1

(a)

$$\%Q=\dfrac{Q_2-Q_1}{Q_1}\times100\%=\dfrac{45-25}{25}\times100\%=80\%.$$

(b)

$$E_d=\dfrac{\Delta \%Q}{\Delta\%P}=\dfrac{80\%}{-30\%}=-2.67.$$