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Radda [10]
3 years ago
11

A shift in the demand curve for pretzels increases the price of pretzels from $1.25 to $1.75 and its quantity demanded from 30 m

illion to 35 million. the price elasticity of demand for pretzels is _____. ?
Business
1 answer:
Sever21 [200]3 years ago
6 0
Initial price, P₀ = $1.25
Initial demand, Q₀ = 30 million

New price, P₁ = $1.75
New demand, Q₁ = 35 million

By definition, price elasticity is
\eta = \frac{(Q_{1}-Q_{0})/(Q_{1}+Q_{0})}{(P_{1}-P_{0})/(P_{1}+P_{0})}
η = (5/65)/(0.5/3)
   = 0.4615

Answer: η = 0.46 (nearest hundredth)

This means that greater demand makes it possible to increase the price. Usually, this is not the case because lowering the price increases sales.

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Explanation:

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2.

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