Question

In a local​ market, the monthly price of internet access service decreases from ​$40 to ​$30​, and the total quantity of monthly accounts across all internet access providers increases from 80 comma 000 to 180 comma 000. what is the value price elasticity of​ demand, expressed as a positive​ number?

Answer 1

The answer is : The demand is elastic.

Elasticity =

[(80,000 - 180,000)/((80,000+180,000)/2)]/[($40 - $30)/(($40 + $30)/2)]|

[(-100,000/130,000)]/[(10/55)] = -.7692/.1818= -4.23

The answer is -4.23, however when considering own price elasticity of demand, we ignore the negative sign and look at the absolute value to determine whether it is elastic or inelastic.