Question

A step-by-stepguide Suppose that during the past year, the price of a laptop computer fell from $2,350 to $1,930. During the same time period, consumer sales increased from 436,000 to 537,000 laptops.
Required:
Calculate the elasticity of demand between these two price.

Answer 1

Answer:

See below

Explanation:

Elasticity of demand is the degree of responsiveness of demand to a change in price

Quantity demand from 436,000 to 537,000

Change in demand from : 537,000 - 436,000 = 101,000 increase in sales

Percentage change = 101,000/436,000 = 0.23 or 23.17% increase

Price : from $2,350 to $1,930

Change in price : $1,930 - $2,350 = -$420 decrease in price

Percentage change = $400/$2,350 = 0.1702 decrease or 17.02% decrease

Elasticity of demand = 23.17%/17.02% = 1.347

Since the price elasticity is greater than 1, it means that the demand for the product is largely affected by the price.