Question

Calculate the Demand Point Elasticity for the demand curve P = 20 - 2Q at P1=12...

Calculate the Demand Point Elasticity for the demand curve

P = 20 - 2Q

at P1=12 , P2=10 , P3= 8. Categorize each elasticity appropriately.



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Homework Answers

Answer #1

Elasticity of demand =(dQ/dP)*(P/Q)

the normal form of the demand curve is

P=20-2Q

2Q=20-P

Q=10-0.5P

dQ/dP=-0.5 ........ the first differentiation of the demand curve concerning P

P=12

Q=10-0.5*12=4

elasticity of demand =(-0.5)*(12/4)

=-1.5

the elasticity of demand is elastic because it is less than -1.

-------

P=10

Q=10-0.5*10=5

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

=(-0.5)*(10/5)

=-1

the elasticity of demand is equal -1. it is unit elastic demand.

--------

P=8

Q=10-0.5*8=6

the elasticity of demand =(-0.5)*(8/6)

=-0.666666667

=-0.67

the elasticity of demand is inelastic because the elasticity is above -1.

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