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SpyIntel [72]
3 years ago
14

Suppose that when the price for Good A increases by 7 percent, the quantity demanded for that product decreases by 2 percent. Ac

cordingly, calculate the own price elasticity of demand for Good A. Is demand for Good A elastic, inelastic, or unit elastic
Business
1 answer:
Monica [59]3 years ago
7 0

Answer:

The own price elasticity is 0.28.

The demand for good a is inelastic.

Explanation:

The price elasticity of demand for a product is the change in the quantity demanded of a product due to a change in its price.

When the price of good A increases by 7% the quantity demanded of that product decreases by 2%.

The own price elasticity of demand

= \frac{change\ in\ quantity\ demanded}{change\ in\ price}

= \frac{2}{7}

= 0.28

The elasticity of demand is less than 1, this implies that demand is inelastic.

A greater change in price is leading to a smaller change in quantity demanded.

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