Question

Karen initially charged $100 for an hour-long massage and averaged 30 clients per week. When she...

Karen initially charged $100 for an hour-long massage and averaged 30 clients per week. When she raised her price to $150, the number of massages decreased to 15 per week. What is the price elasticity of demand for her service? Show complete calculation for points.

HTML EditorKeyboard Shortcuts

Homework Answers

Answer #1

HI

For calculating the price elasticity of demand we need to calculate percentage change in quantity and percentage change in price

here initial number of clients = 30

changed number of clients = 15

so percentage change in clients (quantity) = (15-30)/30 = -15/30

Same way percentage change in price = (150-100)/100= 50/100

so price elasticity of demand = percentage change in quantity/percentage change in price

=-(15/30)/(50/100)

=-1/2*2 = -1

since demand and price moves in opposite direction hence we take absolute number for price elasticity of demand.

Hence in this equation price elasticity of demand = 1

Thanks

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Karen works 50 hours per week. She can work legally as a book keeper and earn...
Karen works 50 hours per week. She can work legally as a book keeper and earn $50 per hour. Alternatively, she can work illegally by helping clients evade taxes for $150 per hour. Karen can only choose one occupation or the other. If she chooses illegal work, the probability of being caught is 0.3, and if caught, Karen will face a penalty of $150 per hour of illegal activity. (Note: if Karen is caught, she retains the proceeds from her...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly O'Brien, David Roberts, and Barbara Smalley. O'Brien and Roberts, both MDs, were on the research faculty at the Chicago Medical School at the time; O'Brien specialized in biochemistry and molecular biology, and Roberts specialized in immunology and medical microbiology. Smalley, who has a PhD, served a department chair of the Microbiology Department at the same school. The company started as a research and development...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly O'Brien, David Roberts, and Barbara Smalley. O'Brien and Roberts, both MDs, were on the research faculty at the Chicago Medical School at the time; O'Brien specialized in biochemistry and molecular biology, and Roberts specialized in immunology and medical microbiology. Smalley, who has a PhD, served a department chair of the Microbiology Department at the same school. The company started as a research and development...
CASE STUDY – Jacobson Carpet Company In January 2002, Ms. Mary Lewis was preparing to meet...
CASE STUDY – Jacobson Carpet Company In January 2002, Ms. Mary Lewis was preparing to meet with Mr. Carpenter, President of Jacobson Carpet Company. Ms. Lewis assumed that the meeting was related to the recent Board of directors of the company. As a direct assistant to the President, she knew from experience that this type of meeting often resulted in a project to be studied. Her expectation was confirmed as soon as Mr. Carpenter began to inform her of the...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly...
Illinois Bio Technologies Illinois Bio Technologies (IBTECH) was founded in Rosemont, Illinois, in 1992 by Kelly O'Brien, David Roberts, and Barbara Smalley. O'Brien and Roberts, both MDs, were on the research faculty at the Chicago Medical School at the time; O'Brien specialized in biochemistry and molecular biology, and Roberts specialized in immunology and medical microbiology. Smalley, who has a PhD, served a department chair of the Microbiology Department at the same school. The company started as a research and development...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT