Answer to Question #182624 in Microeconomics for Mervin

Question

illustrate the elasticity of demand in the market for whiskey. Clearly indicate the correct percentage changes in price and quantity on the elasticity graph.

Answer 1

The price elasticity of demand for whiskey can be calculated as follows:

$Ed =$ $\%∆Q\; /\; \%∆P$%∆Q / %∆P

$= (Q2 - Q1/0.5(Q2 + Q1)) × 0.5(p2 + P1)$

$Ed = (800-1100/0.5(800 + 1100) ) × (0.5(R150 - R100)/R150-R100)$

$= -0.79$