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tankabanditka [31]
3 years ago
14

Suppose that when the price of a good decreases from $220 to $180, the quantity demanded of that good rises from 12 units to 14

units. What is the approximate price elasticity of demand between these two prices
Business
1 answer:
Katarina [22]3 years ago
4 0

Answer:

the price elasticity of demand is -0.77

Explanation:

The computation of the price elasticity of demand is as follows;

= (change in quantity demanded ÷ average of quantity demanded) ÷ (percentage change in price ÷ average of price)  

Here,

Change in quantity demanded is

= Q2 - Q1

= 14 - 12

= 2

And, average of quantity demanded is

= ( 14 + 12) ÷ 2

= 13

Change in price  is

= P2 - P1

= $180 - $220

= -$40

And, average of price is

= ($180 + $220 ) ÷ 2

= 200

So, after solving this, the price elasticity of demand is -0.77

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In the late 1970s Federal Reserve Chairman Paul Volcker contracted the money supply to reduce the rate of inflation. One result
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