Question

Price elasticity

A company changes its price on widgets from $6.50 to $7.25 and the amount consumed decreases from 12 million units to 10.5 million units. What is the elasticity of demand?

What is the rate of change for this change in price?

A company changes its price on widgets from $8.00 to $5.15 and the amount consumed increases from 8 million units to 11.25 million units. What is the elasticity of demand?

What is the rate of change for this change in price?

Answer 1

A company changes its price on widgets from $6.50 to $7.25 and the amount consumed decreases from 12 million units to 10.5 million units. What is the elasticity of demand?

Ed = (Change in Q / Change in P) *P/Q

= (1.5 /0.75) (6.50/12)

= 2*.541

= - 1.08

What is the rate of change for this change in price?

Rate of Chage = Change in Q /Change P

= 1.5/0.75

= -2

A company changes its price on widgets from $8.00 to $5.15 and the amount consumed increases from 8 million units to 11.25 million units. What is the elasticity of demand?

Ed = (Change in Q / Change in P) *P/Q

= (3.25 /2.85) (8/8)

= 1.14

What is the rate of change for this change in price?

= Change in Q / Change in P

=(3.25 /2.85

=1.14