Question

Let the demand function be Q(d) = 200 – 6P(X).

What is the own price elasticity of demand when P = 10?

What is the own price elasticity of demand when P = 20?

What is the own price elasticity of demand when P = 30?

Answer #1

Price elasticity of demand = (P/Q) / (dP/dQ) = (P/Q) (dQ/dP)

P = (200-Q)/6

dP/dQ = -1/6

dQ/dP = -6

a) P = 10

Q = 200 - 6x10 = 140

Price elasticity of demand = (P/Q) (dQ/dP) = (10/140) x -6

Price elasticity of demand = -3/7

b)

P = 20

Q = 200 - 6x20 = 80

Price elasticity of demand = (P/Q) (dQ/dP) = (20/80) x -6

Price elasticity of demand = -1.5

c)

P = 30

Q = 200 - 6x30 = 20

Price elasticity of demand = (P/Q) (dQ/dP) = (30/20) x -6

Price elasticity of demand = -9

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