Answer:
original quantity = 468,000
Average quantity = 382,000
new quantity = 296,000
a. -45.03%
original price - $2,950
new price = $3,110
Average price = 3030
3. -172,000
$160
b. 5.28%
Explanation:
Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.
Price elasticity of demand = midpoint change in quantity demanded / midpoint change in price
Average quantity = (468,000 + 296,000) / 2 = 382,000
Average price = ($2,950 + $3,110) / 2 = 3030
Change in quantity = 296,000 - 468,000 = -172,000
Change in price = $3110 - $2950 = $160
percentage change in quantity demanded = (-172,000 / 382,000) x 100 = -0.4503 = -45.03%
percentage change in price = 160 / 3030 x 100 = 5.28%
Elasticity of demand = -45.03% / 5.28% = -8.53 = 8.53
