Question

Think of a good or service with which you are familiar and for which there has been a recent change in quantity demanded because of a change (up or down) in price.

What is the good or service?

What is your best estimate of the original quantity demanded? New quantity demanded? (please explain your units carefully.) You don’t need to do research: these numbers can be a best “guess.”

What is your best estimate of the original price? New price? (please explain your units carefully.)

What is price elasticity of demand for this good or service? Please show your work.

Answer 1

IPHONES. DUE TO THE SET UP OF A NEW FACTORY IN A COUNTRY THE PRICE OF IPHONES WENT DOWN, WHICH RESULTED IN THE INCREASE IN DEMAND OF THE IPHONES.

EARLIER THE QUANTITY DEMANDED BY THE CONSUMERS WAS 200 UNITS. NOW THE NEW QUANTITY DEMANDED HAS INCREASED TO 350 UNITS.

EARLIER THE PRICE PER IPHONE WAS $900 AND THE NEW PRICE PER IPHONE IS $800.

PRICE ELASTICITY OF DEMAND FOR THIS GOOD:

Price elasticity of demand = (Change in Quantity demanded*original price)/(change in price*original Quantity demanded)

= {(350-200)*900}/{(900-800)*200}

= (150*900)/(100*200)

= 135000/20000

= 6.75

THE PRICE ELASTICITY OF DEMAND FOR THIS PRODUCT IS GREATER THAN UNITY THAT IS ELASTIC DEMAND.

NOTE: I HOPE YOU WILL BE SATISFIED WITH MY ANSWER. PLEASE DO PROVIDE RATING. THANK YOU AND HAVE A NICE DAY. :))