Question

when price of indomie noodles was lowered from #50 to #40 per unit, quantity demanded increases from 400 to 600 units per week. calculate the coefficient of price elasticity of demand and determine whether by lowering price this firm has made a wise decision ​

Answer 1

Answer:

The price elasticity of demand is -10

Step-by-step explanation:

Given

$p_1,p_2 = 50,40$

$q_1,q_2 = 400,500$

Solving (a): The coefficient of price elasticity of demand (k)

This is calculated as:

$k = \frac{\triangle q}{\triangle p}$

So, we have:

$k = \frac{500 - 400}{40 - 50}$

$k = \frac{100}{-10}$

$k = -10$

Because |k| > 0, then we can conclude that the company made a wise decision.