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6 March, 04:47

Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250. What is Jim's own price elasticity of demand?

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  1. 6 March, 05:02
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    Jim's own price elasticity of demand is 1

    Explanation:

    Price elasticity is referred to as the effect on demand of a product or service with change in the price of that product or service. It is calculated as the ratio between the increase or decrease in demand with the increase or decrease in price.

    we are provided with the following data;

    Original quantity demanded = 8000 units

    new quantity demanded = 6000 units

    change in quantity demanded = 8000 - 6000 = 2000 units

    Original price = $200

    new price = $250

    change in price = $250 - $200 = $50

    Price elasticity of demand;

    (change in quantity : original quantity) * (original price : change in price)

    = (2000 : 8000) * (200 : 50)

    = 0.25 * 4

    = 1

    Jim's own price elasticity of demand = 1
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