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If the price of tomatoes rises from 7 SAR per kg to 9 SAR per kg,...

If the price of tomatoes rises from 7 SAR per kg to 9 SAR per kg, the quantity demanded decreases from 1000 boxes to 600 boxes. Calculate the price elasticity of demand over this price range. Is the demand for tomatoes elastic or inelastic?

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Answer #1

If elasticity is greater than 1, it suggests that quantity demanded changes proportionately more than the price changes. In other words, if elasticity of demand is greater than 1, then demand is elastic. In our case absolute value of elasticity is greater then 2 which means demand for Tomatos is elastic.

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