Answer to Question #286132 in English for Syirah

Question

The owner of the firm would like to maximize the revenue for each product, so she asks Kai

to calculate the value of elasticity and he (Kai) asks you (an ace economics student) to

calculate the price elasticity of demand for both products and advise Kai which price to

charge based upon your economics knowledge.

Answer 1

The price elasticity of demand is the ratio between the percentage change in the quantity demanded (Qd) and the corresponding percent change in price

$Price Elasticity of Demand =$

When the price elasticity of a good is less than 1, it’s considered inelastic. That means a one unit increase in price resulted in a less than one unit decrease in demand. On the other hand, if the coefficient is more than 1, the good is elastic. That means a unit increase in price will cause an even greater drop in demand.