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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

On Tuesday, the price and quantity demanded are $7 and 120 units, respectively. Ten days later, the price and quantity demanded are $6 and 150 units, respectively. What is the price elasticity of demand between the $7 and $6 prices?

To determine

The price elasticity of demand.

Explanation

Elasticity of demand (Ed) can be calculated using the formula given below:

Ed=  ΔQdQaverage ΔPPaverage (1)

Since the quantity demanded changes from 120 units to 150 units, the change in quantity demanded (ΔQd) is 30 (150-120). The price changes from $7 to $6, the change in price (ΔP) is $1. In Equation-1, Qaverage stands for the average of the two quantities demanded that is 135 (120+150/2)

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