Question

Consider a competitive market for which the quantities demanded and supplied​ (per year) at various prices are given as​ follows: Price​ (Dollars) Demand​ (Millions) Supply​ (Millions) 60 22 14 80 20 16 100 18 18 120 16 20 Calculate the price elasticity of demand when the price is ​$100. The price elasticity of demand is 0. ​(Enter your response rounded to two decimal places.​)

Answer 1

Answer:

Price elasticity of demand is 0.47

Explanation:

Price elasticity of demand = % change in quantity demanded / %change in price

Price elasticity of demand = Q2-Q1/(Q2+Q1/2) / P2-P1/(P2+P1/2)

P1= $80, Q1 = 20, P2 = $100, Q2 = 18

Price elasticity of demand = (18 - 20) / (18+20/2) / (100-80)/(100+80/2)

Price elasticity of demand = (-2/19) / (20/90)

Price elasticity of demand = -2/19 * 9/2

Price elasticity of demand = -18/38

Price elasticity of demand = -0.47

Thus, Price elasticity of demand is 0.47