Question

The demand function of a product is given as P = 70 − 3Q, where P and Q are the price and quantity, respectively. Determine the price elasticity of demand if the price is equal to P = 10. [1] −1,167 [2] −0,960 [3] −0,800 [4] −0,167

Answer 1

Price elasticity of demand:

$e_p=\frac{dQ}{dP}\cdot\frac{P}{Q}$

$Q=(70-P)/3=(70-10)/3=20$

$\frac{dQ}{dP}=-\frac{1}{3}$

$e_p=-\frac{1}{3}\cdot\frac{10}{20}=-0.167$

Answer: [4]