Answer:
1.33
Explanation:
Step 1:
Original quantity = 470,000
New quantity = 363,000
Original price = $2,100
New price = $2,550
Step 2:
Average quantity:
= (Original quantity + New quantity) ÷ 2
= (470,000 + 363,000) ÷ 2
= 833,000 ÷ 2
= 416,500
Average price:
= (Original price + New price) ÷ 2
= ($2,100 + $2,550) ÷ 2
= $4,650 ÷ 2
= 2,325
Step 3:
change in quantity = new quantity - original quantity
= 363,000 - 470,000
= (107,000)
change in price = new price - original price
= $2,550 - $2,100
= $450
Step 4:
percentage change in quantity demanded:
= change in quantity ÷ average quantity
= (107,000) ÷ 416,500
= 0.2569 or (25.69%)
percentage change in price:
= change in price ÷ average price
= $450 ÷ 2,325
= 0.1935 or 19.35%
Step 5:
Price elasticity of demand:
= percentage change in quantity demanded ÷ percentage change in price
= 25.69 ÷ 19.35
= 1.327 or 1.33 (approx)
