Question

a jua kali artisan produces specially designed leather belts. the demand curve for the belts is a follows
price ksh quantity of belts
1500 200
2000 100
calculate the arc elasticity of demand and interpret

Answer 1

$$Kd=(Q2-Q1)/((Q1+Q2)/2):(P2-P1)/((P1+P2)/2)$$

So,

Kd=(100-200)/150:(2000-1500)/1750=-2.33

This means that if price increases by 1% the demand decreases by 2.33%