Question

When the price of oranges increases from $4 to $6 per bag, the quantity demanded of oranges decreases from 800 bags to 700 bags. The price elasticity of demand over this price range is equal to___________

Answer 1

Answer:

0.25

Explanation:

$Percentage\ increase\ in\ price=\frac{6-4}{4}\times100$

                                                          = 50%

$Percentage\ Decrease\ in\ quantity\ demanded=\frac{800-700}{800}\times100$

                                                          = 12.5%

Therefore,

$price\ elasticity\ of\ demand=\frac{Percentage\ change\ in\ quantity\ demanded}{percentage\ change\ in\ price}$

$price\ elasticity\ of\ demand=\frac{12.5}{50}$

                                                     = 0.25

Hence, the price elasticity of demand over this price range is equal to 0.25