Answer:
a. Price elasticity of demand is 3.5.
b. Demand for strawberries elastic.
Explanation:
a. Calculate the price elasticity of demand over this price range.
Price elasticity of demand can be calculated as the percentage change in price divided by percentage change in quantity demanded.
We can therefore proceed as follows:
Percentage change in price = [(4 - 2) ÷ 2] × 100 = 100%
Percentage change in quantity demanded = [(1,400 - 1,000) ÷ 1,400] × 100 = 28.57%
Price elasticity of demand = 100% ÷ 28.57% = 3.5
Therefore, the price elasticity of demand over this price range is 3.5.
b. Describe the demand for strawberries.
Since the calculated price elasticity of demand of 3.5 is greater 1, this implies that demand for strawberries elastic. That is, customers are sensitive and more responsive to the change in price of strawberries.
