Asked Mar 18, 2019

Consider the price-demand equation given by

p=8/5 − 1/2500x.
For which value of p is the elasticity of demand undefined? Give your answer as a decimal to one decimal place.



Expert Answer

Step 1

As a first step, let's express demand "x" as a function of price "p"

p=8/5 − 1/2500x.

Hence, 1 / 2500x = 8/5 - p = (8 - 5p)/5

Hence, x = 5 / [2,500 x (8 - 5p)] = 1 / [500 x (8 - 5p)]

Step 2

As a second step, we need to calculate the elasticity of demand with respect to price, i.e dx / dp. Please see the white board for the subsequent steps. 

Step 3

We need to find the value p for which the elasticity of demand i.e. dx / dp is undefined.

dx/dp will ...

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