Answer:
Part 1. inelastic.
Part 2. inelastic.
Part 3. inelastic.
Explanation:
When the coefficient of elasticity of demand is less than 1, demand is inelastic, when it is equal to 1, demand is unitary elastic, when it is greater than 1, demand is elastic, and when it is equal to zero demand is perfectly inelastic.
Part 1
Price Elasticity of demand = (dQ/dP) x P/Q
Where : dQ = Change in Quantity
dP = Change in Price
P = Initial or Old price
Q = Initial of Old Quantity
dQ = $35,000 - $40,000 = - $5,000
dP = $10 - $8 = $2
P = $8
Q = $40,000
Price Elasticity of demand = (-$5,000/$2) * $8/ $40,000
= 2,500 * 1/5000 = -0.5
Disregard the minus sign, since elasticity of demand is less than 1, demand is inelastic.
Part 2
Price Elasticity of demand = (dQ/dP) x P/Q
dQ = $1,800 - $2,000 = - $200
dP = $50 - $40 = $10
P = $40
Q = $2,000
Price Elasticity of demand = (-$200/$10) * $40/ $2,000
= 20 * 0.02 = -0.4
Disregard the minus sign, since elasticity of demand is less than 1, demand is inelastic.
Part 3
Price Elasticity of demand = (dQ/dP) x P/Q
dQ = $120 - $150 = - $30
dP = $5 - $4 = $1
P = $4
Q = $150
Price Elasticity of demand = (-$30/$1) * $4/ $150
= 30 * 2/75 = - 0.8
Disregard the minus sign since elasticity of demand is less than 1, demand is inelastic.
