Question

Suppose that at a price of $4.70, the quantity of output demanded is 15, and at a price of $5.50, the quantity of output demanded is 7. What is the elasticity of demand? (ignore the negative sign.)

please answer only, no need to show work

Answer 1

Price elasticity of demand = Percentage change in Quantity demanded /Percentage change in Price

Price elasticity of demand =

where is the change in quantity

Q1 is original quantity

is the change in price

P1 is the original price

Given, Q1 = 15

Q2 = 7

P1 = $4.70

P2 = $5.50

Thus, Price Elasticity of demand = 7 - 15 / 15 * 4.70 / 5.50 - 4.70

= - 8 / 15 * 4.70 / .80

= - 3.13

Thus , Price Elasticity of Demand = 3.13

As the elasticity is greater than 1, so the demand is elastic in nature. This is because percentage change in quantity demanded is much more than the percentage change in price.