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The data below represent a demand schedule.
Product Price Quantity Demanded
$30 10
25 20
20 30
15 40
10 50

Instructions: Round your answers to 2 decimal places. Enter your answers as positive values (absolute values). Determine the price elasticity of demand between each of the following prices:

a. Between P1 = $30 and P2 = $25. Ed = _________
b. Between P1 = $25 and P2= $20, Ed = _________
c. Between P1 = $20 and P2 =$15, Ed= _________
d. Between P1 = $15 and P2 =$10, Ed = _________

Respuesta :

Answer:

a. Price Elasticity of Demand = 6 (elastic)

b. Price Elasticity of Demand = 2.5 (elastic)

C. Price Elasticity of Demand = 1.3 (elastic)

d. Price Elasticity of Demand = 0.75 (inelastic)

Explanation:

Price elasticity of demand = % change in quantity demanded divided % change in price.

% change in Qty demanded = [(Q2 minus Q1) all divided by Q1 ] *100%

% change in Price = [(P2 minus P1) all divided by P1 ] *100%

a. % change in Qty demanded = [(20 - 10)/10 x 100%] = 100%

   % change in Price = [(25 - 30)/30 x 100%] = -16.67%

   Price Elasticity of Demand = 100% / -16.67% = 6

   This implies the product is very elastic being very far from 1. And this is obvious considering that only a 16.67% drop in price resulted in a 100% increase in Volume

b. % change in Qty demanded = [(30 - 20)/20 x 100%] = 50%

   % change in Price = [(20 - 25)/25 x 100%] = -20%

   Price Elasticity of Demand = 50% / -20% = 2.5

   This implies the product is very elastic being very far from 1. And this is obvious considering that only a 20% drop in price resulted in a 50% increase in Volume

c. % change in Qty demanded = [(40 - 30)/30 x 100%] = 33.3%

   % change in Price = [(15 - 20)/20 x 100%] = -25%

   Price Elasticity of Demand = 33.3% / -25% = 1.3

   This implies the product is elastic being over 1. And this is obvious considering that only a 25% drop in price resulted in a 33.3% increase in Volume

d. % change in Qty demanded = [(50 - 40)/40 x 100%] = 25%

   % change in Price = [(10 - 15)/15 x 100%] = -33.3%

   Price Elasticity of Demand = 25% / -33.3% = 0.75

   This implies the product is inelastic being less than 1. And this is obvious considering that a 33.3% drop in price resulted in only a 25% increase in Volume

The price elasticity of demand between each of the following price is :

a. Price Elasticity of Demand = 6 (elastic)

b. Price Elasticity of Demand = 2.5 (elastic)

C. Price Elasticity of Demand = 1.3 (elastic)

d. Price Elasticity of Demand = 0.75 (inelastic)

"Price elasticity of demand"

Formula :

Price elasticity of demand = % change in quantity demanded divided % change in price.

% change in Qty demanded = [(Q2 minus Q1) all divided by Q1 ] *100%

% change in Price = [(P2 minus P1) all divided by P1 ] *100%

Part a:

Between P1 = $30 and P2 = $25. Ed = ??

Change in Qty demanded

  • % change in Qty demanded = [(Q2 minus Q1) all divided by Q1 ] *100%
  • % change in Qty demanded = [(20 - 10)/10 x 100%]
  • % change in Qty demanded= 100%

Change in Price

  • % change in Price = [(P2 minus P1) all divided by P1 ] *100%
  • % change in Price = [(25 - 30)/30 x 100%]
  • % change in Price= -16.67%

Price elasticity of demand

  • Price elasticity of demand = % change in quantity demanded divided % change in price.
  • Price Elasticity of Demand = 100% / -16.67%
  • Price Elasticity of Demand = 6

 The demand is elastic in nature.

Part  b)  

Between P1 = $25 and P2= $20, Ed =??

Change in Qty demanded

  • % change in Qty demanded = [(Q2 minus Q1) all divided by Q1 ] *100%
  • % change in Qty demanded = [(30 - 20)/20 x 100%]
  • % change in Qty demanded= 50%

Change in Price

  • % change in Price = [(P2 minus P1) all divided by P1 ] *100%
  • % change in Price = [(20 - 25)/25 x 100%]
  • % change in Price= -20%

Price elasticity of demand

  • Price elasticity of demand = % change in quantity demanded divided % change in price.  
  • Price Elasticity of Demand = 50% / -20%
  • Price elasticity of demand= 2.5

 The demand is elastic in nature.

Part c)  

Change in Qty demanded

  • % change in Qty demanded = [(Q2 minus Q1) all divided by Q1 ] *100%
  • % change in Qty demanded = [(40 - 30)/30 x 100%]
  • % change in Qty demanded = 33.3%

Change in Price

  • % change in Price = [(P2 minus P1) all divided by P1 ] *100%
  • % change in Price = [(15 - 20)/20 x 100%]
  • % change in Price= -25%

Price elasticity of demand

  • Price elasticity of demand = % change in quantity demanded divided % change in price.
  • Price Elasticity of Demand = 33.3% / -25%
  • Price Elasticity of Demand= 1.3

 

 The demand is elastic in nature.

Part  d)

Change in Qty demanded

  • % change in Qty demanded = [(Q2 minus Q1) all divided by Q1 ] *100%
  • % change in Qty demanded = [(50 - 40)/40 x 100%]
  • % change in Qty demanded = 25%

Change in Price

  • % change in Price = [(P2 minus P1) all divided by P1 ] *100%
  • % change in Price = [(10 - 15)/15 x 100%]
  • % change in Price= -33.3%

Price elasticity of demand

  • Price elasticity of demand = % change in quantity demanded divided % change in price.
  • Price Elasticity of Demand = 25% / -33.3%
  • Price elasticity of demand= 0.75

 The demand is inelastic in nature.

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