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Fittoniya [83]
3 years ago
7

Suppose that in a month the price of oranges increases from $.75 to $1. At the same time, the quantity of oranges demanded decre

ases from 100 to 80. The price elasticity of demand for oranges (calculated using the initial value formula, also known as the simple elasticity formula) is:_______A 0.6. B. 0.75. C. 025. D. 20.
Business
1 answer:
Arte-miy333 [17]3 years ago
3 0

Answer:

Option A is correct

Price elasticity of demand =0.6

Explanation:

<em>Price elasticity of demand (PED) is the degree of responsiveness of demand to a change in price.  </em>

<em>Where a percentage change in price produces a more than a proportional change in quantity, we say the product is price elastic. On the other hand, where a change in price produces a less than a proportional change in quantity demand, then demand is price inelastic  </em>

PED is computed as follows:  

PED = % change in quantity /% change in Price

% change in demand = (100-80)/100 × 100 = 20%  

% change in price =(0.75-1)/0.75 × 100 = 33.33%

PED = 20%/33.33% = 0.600

Price elasticity of demand =0.6

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