Answer to Question #289346 in Microeconomics for Yahye

Question

A fall in price of from 1 shs 0.50 per bushel to 9.20 per bushel, the quantity of the demand from 18800 to 21200 per bushells. What is the price elasticity of demand?

Answer 1

Solution:

Price elasticity of demand (PEd) = $=\frac{\%\;change\; in\; quantity\; demanded}{\%\; change\; in\; price}$

Q₁ = 18800        Q₂ = 21200

P₁ = 1                  P₂ = 0.50

 

PED = $=\frac{Q_{2} -Q_{1}}{(Q_{2}+Q_{1})/2 } \div \frac{P_{2} -P_{1}}{(P_{2}+P_{1})/2 }$

PED = $\frac{21200 -18800}{(21200+18800)/2 } \div \frac{21200 -18800}{(21200+18800)/2 }$

PED =$\frac{2400}{20000} \div\frac{-0.5}{0.75} = \frac{0.12}{-0.67} = -0.18$

The price elasticity of demand = -0.18