Ask Question
16 October, 02:25

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop?

+4
Answers (1)
  1. 16 October, 02:31
    0
    Price Elasticity of demand = 3

    Explanation:

    The elasticity of demand indicates how the quantity demanded change when the price changes. Is defined by this equation:

    Price Elasticity of Demand (PED) = Percentage change in Q / Percentage change in P

    In this case, the problem is giving both percentage changes:

    Percentage change in Q = - 15% (It is negative because the number of haircuts decreased)

    Percentage change in P = + 5%

    PED = - 15%/5% = - 3

    The PED is always negative because the demand curve has a negative slope. This happens because at lower prices the quantity demanded is high and at high prices the quantity demanded is low.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers