Buying insurance and investing in the future requires spending less in the present. Why is this a hard choice for many people? W
2 answers:
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Answer:
Price elasticity of demand, = 1.63
Explanation:
We know,
Price elasticity of demand, =
We will be using mid-point method to calculate the price elasticity.
Here,
Percentage change in Quantity demanded = × 100
or, Percentage change in Quantity demanded = × 100
Therefore, % change in Quantity demanded = × 100 = 88.89%
Again,
Percentage change in price = × 100
or, Percentage change in price = × 100
Therefore, Percentage change in price = × 100 = - 54.55%
Therefore, Price elasticity of demand, = 88.89% ÷ (- 54.55%) = 1.63
We know, price elasticity is always positive. Therefore, we have to give an absolute value for price elasticity.