Question

If, as the price of good Y rises from $5.00 to $5.75, the quantity demanded of good Y falls from 54 units to 48 units, price elasticity of demand for good Y in this price range is

Question 7 options:

a)

0.84.

b)

0.37.

c)

1.05.

d)

4.77.

e)

1.19.

Answer 1

Please rate the answer
Answer A)0.74 , There might br a mistake in the options

Price elasticity of demand measures the change in quantity demanded of a good as a result of change in its price. Price elasticity of demand is negative as there is an inverse relation between the quantity demanded and the price . As the price rises the quantity demanded falls and vice versa.

P.E.D = Percentage change in quantity / Percentage change in price

Percentage change in price
= ((5.75- 5) /5 )* 100
=(.75/5) * 100
= 15 %

Percentage change in quantity
= (54-48)/54 ) * 100
= 6/54 * 100
=11.11 %

P.E.D
= 11.11% /15%
=0.74