Question

If the price of Pumpkins goes from $8 to $6, and the Quantity purchased goes from 40 to 50, is the product considered to be:

b . Inelastic c. Unit Elastic a. Elastic

Answer 1

Price	Quantity Demand
$8	40
$6	50

Elasticity of Demand

Elasticity of demand = % Change in Quantity Demand / % Change in Price

% Change in Quantity Demand = Change in Demand / Initial Demand x 100

% Change in Quantity Demand = 50 - 40 / 40 x 100

% Change in Quantity Demand = 10 / 40 x 100

% Change in Quantity Demand = 25%

% Change in Price = Change in Price / Initial Price x 100

% Change in Price = 6 - 8 / 8 x 100

% Change in Price = -2 / 8 x 100

% Change in Price = -25%

Elasticity of demand = % Change in Quantity Demand / % Change in Price

Elasticity of demand = 25 / -25

Elasticity of demand = 1 (Negative sign is ignored in elasticity of demand)

As elasticty of demand is equal to 1 hence demand is unit elastic

Option C is correct

Note

Ed > 1 (Elastic demand)

Ed < 1 (Inelastic demand)

Ed = 1 (Unitary demand)