Question

Consider Nibbles, a very specialized brand of parakeet chow.

Answer 1

The price elasticity of demand for the parakeet chow is 1.33.

What is price elasticity of demand?

Price elasticity of demand is the change in product quantity demanded to change in price.

From the question:

$\%\ Change\ in \ quantity=\frac{30000-40000}{30000}= -33.3\%\\\\\%\ Change\ in \ price=\frac{20-16}{16}= 25\%\\\\PED=|\frac{\%\ Change\ in \ quantity}{\%\ Change\ in \ price} |=|\frac{-33.3\%}{25\%}|=1.33$

The price elasticity of demand for the parakeet chow is 1.33.

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