Question

A firm's demand curve is P = 1 - 2Q. The firm has a current price of R1000 and it sells 100 units per day. What is the firm's price elasticity of demand?

Answer 1

P = 1 - 2Q, so Q = 0.5 - 0.5P.

The firms price elasticity of demand is:

$Ed=−0.5×1000/100=−5.$

So, the demand is elastic at this price.