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7 October, 19:26

Assume that when the price of a good increases from $45 to $55, the quantity demanded of the good decreases from 275 to 225. What is the price elasticity of demand

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  1. 7 October, 19:31
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    Explanation:

    Mathematically, the price elasticity of demand is the ratio of the percentage change in price to the percentage change in quantity demanded.

    Hence, to get the price elasticity of demand, we divide the percentage change in price by the percentage change in quantity demanded.

    Here, change in price equals 55-45 = 10

    % change in price = 10/55 * 100 = 18.18

    Change in quantity demanded =

    275 - 225 = 50

    % change in quantity demanded = 50/275 * 100 = 18.18

    Price elasticity of demand = 18.18/18.18 = 1
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