Answer:
a). The price elasticity of demand=0.13
b). Since the price elasticity of demand is less than 1, we can conclude that the demand for Willie's widgets under these conditions is inelastic, meaning there no substantial change in demand due to his change in price
Explanation:
a). The price elasticity of demand can be described as the percentage change in quantity demanded over a percentage change in price. This can be expressed as;
Price elasticity of demand=percentage change in quantity demanded/percentage change in price
percentage change in quantity demanded=Change in quantity/Initial quantity×100
where;
change in quantity=(30, 000-31,000)=-1,000
Initial quantity=31,000
replacing;
(-1000/31000)×100=-3.23%
percentage change in price=change in price/initial price×100
where;
change in price=(15-12)=$3
Initial price=$12
replacing;
(3/12)×100=25%
The price elasticity of demand=(3.23/25)=-0.1292 rounded of to 2 decimal and places and absolute=0.13
The price elasticity of demand=0.13
b). price elasticity of demand<1
Since the price elasticity of demand is less than 1, we can conclude that the demand for Willie's widgets under these conditions is inelastic, meaning there no substantial change in demand due to his change in price
