Answer to Question #302743 in Quantitative Methods for Mduduzi

Question

If the demand function of a commodity is \(Q=80-2,5P,\) where P and Q are price and quantity respectively, determine the price elasticity of demand when the price is R20. Indicate whether demand is elastic or inelastic at this price and provide justification for your answer.

1.

εd=−1,7; because |−1,7|=1,7>1, demand is elastic

2.

εd=−0,6; because |−0,6|=−0,6<1, demand is elastic

3.

εd=0,6; because |0,6|=0,6<1, demand is inelastic

4.

εd=1,7; because |1,7|=1,7>1, demand is inelastic