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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

A college raises its annual tuition from $23,000 to $24,000, and its student enrollment falls from 4,877 to 4,705. Compute the price elasticity of demand. Is demand for the college elastic or inelastic?

To determine

The price elasticity of demand.

Explanation

Price elasticity of demand (Ed) can be calculated using the following formula:

Ed=  ΔQdQaverage ΔPPaverage (1)

Here,

ΔQd is the change in quantity demanded.

Qaverage stands for average of the two quantities demanded.

ΔP is the change in price.

Paverage stands for the average of the two prices

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