Question

Given the demand function P = 20 – 5Q, find the price elasticity of demand when price of the commodity is 5 Birr per unit. Mention if the demand is price elastic or inelastic at this point.

Answer 1

P=20 - 5Q

5 = 20 - 5Q

5 - 20 = 5Q

-15 = 5Q

Q = 3

$E_d =\frac{dQ}{dP}.\frac{P}{Q}=-5×\frac{5}{3}=-8.333$

The demand price is inelastic