Question

The demand function for a product is defined as Q = 24 – 2 P. If price is equal to 4, then the price elasticity of demand is A. elastic. B. unit elastic. C. inelastic. D. There is not enough information to determine the answer.

Answer 1

Answer:

option (c) inelastic

Explanation:

Given:

Q = 24 – 2 P

at P = 4

Q = 24 - 2(4)

= 16

Now,

Elasticity = $\frac{\textup{dQ}}{\textup{dP}}\times\frac{\textup{P}}{\textup{Q}}$

on substituting the respective values, we get

Elasticity = $\frac{\textup{d(24 – 2 P)}}{\textup{dP}}\times\frac{\textup{4}}{\textup{16}}$

or

Elasticity = -2 × 0.25

or

Elasticity = - 0.5

Since,

Elasticity is less than 1, therefore, the demand is inelastic.

Hence,

option (c) inelastic