Question

If the price declines from $400 to $300 and as a result quantity demand increases from 1100 to 1400, elasticity of demand is

Answer 1

Answer on the Question #72492, Economics / Microeconomics

If the price declines from $400 to $300 and as a result quantity demand increases from 1100 to 1400, elasticity of demand is

The formula used to calculate the price elasticity of demand is:

$$\text{Arc elasticity of demand (PED)} = \frac{\text{Q2-Q1/midpoint Q}}{\text{P2-P1/ midpoint P}}$$ $$E = (1400 - 1100) / (1400 + 1100) \times 0.5 = (300 - 400) / (300 + 400) \times 0.5 = 0.24 = (-0.29) = -0.83, \text{ so the demand is inelastic}$$

Answer provided by AssignmentExpert.com