Question

5. Determine the price elasticity of demand, if sales increase from 400 to 500u, when the price of the product decreases from $ 8.50 to $ 8.00. Sort the good.

I. Identification of variables

P1=	Q1=
P2=	Q2=

II. Get the changes

▲Q =

▲P=

III. Get the averages

_ Q=	_ P =

IV. Calculate EPD and classify the demand

Answer 1

1st Part: P1= $8.50, P2= $8.00, Q1= 400 units, Q2= 500 units

2nd Part: Changes in the Quantity is (500-400)= 100 units and whereas,

Changes in the Price is ($8.50-$8.00)= $0.5

3rd Part: Average of Quantity is (400+500 Divide by 2) is 450 units and whereas,

Average of Price is ($8.50+$8.00 Divide by 2) is $8.25

4th Part is as follows:

Price Elasticity of Demand is (Change in Quantity Divide by Change in Price Multiply by Original Price Divide by Original Quantity)

100 Divide by (0.5 means (5/10) so, 100 * 5/10) = 50

8.50 / 400 means (850 / 100 * 400) = 3,400

Hence, 50 * 3,400 = 1,70,000

Ans. 1,70,000