Question

. A town of 2,000 households constitutes a market for eggs. Current sales are 2400 dozen eggs per week at a price of $1.25 per dozen. 1200 households living on the west side of the river buy1600 dozen eggs and their elasticity of demand is -1.5. The remaining households live on the east side of the river, buy the rest of the eggs and have an elasticity of demand of -3. Calculate the elasticity of market demand curve for the town as a whole.  

Answer 1

$800\times 1.25=1000$

$1200\times 1.25 = 1500$

$(1000−1500)\times [\frac{1000+15000}2]\times 100$

$=\frac{−500}{1250}\times 100$

$800−1200=−400$

$800+1200 = 2000$

$\frac{-400}{2000}\times*100 = -20$

$\frac{-20}{40} = -0.5$

PED of market demand curve for the town as a whole = -0.5