Question

When the price of a cruise rises from $19,500 to $20,500​, the quantity demanded decreases from 2,100 to 1,900 travelers.

Use this information to calculate the price elasticity of demand.

The percentage change in the price of a cruise is——？

The percentage change in the quantity of cruises demanded is ——？percent.

​>>> Report your answer as a positive number.

The price elasticity of demand for cruises is——?

Answer 1

Initial price of cruise = $19,500

Increased price of cruise = $20,500

% change in price = (Increased price - initial price)/initial price = (20500-19500) / 19500 = 5.13%

Initial demand = 2,100 travelers

Reduced demand = 1,900 travelers

% change in demand = (Reduced demand - initial demand)/initial demand= (1900-2100)/2100 = -9.52%

So, now price elasticity of demand = %change in quantity demanded / % change in price = -9.52%/5.13% = -1.86

So, Price elasticity of demand number = 1.86