Answer to Question #197894 in Calculus for Tavlene Singh

Question

If the demand function of a commodity is Q = 36 − 4P, where P and Q are price and quantity respectively, determine the price elasticity of demand when the price is R5. Indicate whether demand is elastic or inelastic at this price and provide justification for your answer. [1] εd = −1,25; because | − 1,25| = 1,25 > 1, demand is elastic [2] εd = −0,25; because | − 0,25| = −0,25 < 1, demand is elastic [3] εd = 0,25; because |0,25| = 0,25 < 1, demand is inelastic [4] εd = 1,25; because |1,25| = 1,25 > 1, demand is inelastic 

Answer 1

Given that,

Demand Function is $Q = 36-4P$ and

Price = 5

$Q = 36 - 4 \times 5$

  $\ \ \ = 36 - 20$

$=16$

$\dfrac{∆Q}{∆P}= -4$

We know that,

Price Elasticity Of demand$=\dfrac{ P}{Q}\times \dfrac{\delta Q}{\delta P}$

$=\dfrac{5}{16}x-4$

$=-1.25$

Hence the option A is correct

"$εd = −1,25$ ; because $| − 1,25| = 1,25 > 1$ , demand is elastic"