Answer to Question #204043 in Microeconomics for Stephen Oppong

Question

Given the demand curve for commodity as Q=60-3p where Q is the quantity demanded and P the price per unit . Determine the price elasticity of demand at P= 10

Answer 1

Solution:

Price elasticity of demand = $\frac{\%\triangle Q}{\%\triangle P} = \frac{\triangle Q}{\triangle P} \times \frac{P}{Q}$

The slope of Q = a – bP

$\frac{\triangle Q}{\triangle P} = -b$

Price elasticity of demand = $-b \times \frac{P}{Q}$

Derive quantity by substituting the price value, when P = 10:

Q = 60 – 3P

Q = 60 – 3(10)

Q = 60 – 30 = 30

Q = 30

P = 10

-b = -3

Therefore:

Price elasticity of demand $= -3 \times \frac{10}{30} = -1$

Price elasticity of demand = 1