Question

The data below represent a demand schedule.

Product price quantity demanded

40 10

35 15

30 20

25 25

20 30

Determine the price elasticity of demand between each of the following prices:

Instructions: Round your answers to 2 decimal places. Enter your answers as positive values (absolute values).     

a. Between P₁ = $40 and P₂ = $35, E_d =

b. Between P₁ = $35 and P₂ = $30, E_d =

c. Between P₁ = $30 and P₂ = $25, E_d =

d. Between P₁ = $25 and P₂ = $20, E_d =

Answer 1

Answer
a. Between P1 = $40 and P2 = $35, Ed =

Elasticity of demand=(change in quantity/average quantity)/(change in price/average price)
Change in quantity=15-10=5
average quantity=(15+10)/2=12.5
change in price=35-40=-5
average price=(35+40)/2=37.5
Elasticity of demand=(5/12.5)/(-5/37.5)
=-3
=3 (absolute value)

b. Between P1 = $35 and P2 = $30, Ed =
Elasticity of demand=(change in quantity/average quantity)/(change in price/average price)
Change in quantity=20-15=5
average quantity=(20+15)/2=17.5
change in price=30-35=-5
average price=(30+35)/2=32.5
Elasticity of demand=(5/17.5)/(-5/32.5)
=-1.85714286
=1.86 (absolute value)
and so on

P	Q	E
40	10
35	15	3
30	20	1.86
25	25	1.22
20	30	0.82