(a)
(a)
Explanation of Solution
The general formula for calculating
Price elasticity of demand curve=QuantityNew−QuantityOld(QuantityNew+QuantityOld2)PriceNew−PriceOld(PriceNew+PriceOld2) (1)
Substitute the respective values in Equation (1) to calculate the price elasticity of demand in the first case.
Price elasticity of demand=(40−20(40+202))(20−25(20+252))=(2030)(−522.5)=0.666666−0.222222=−3
Price elasticity of demand is 3 (ignore the sign).
Price elasticity of
(b)
Price elasticity of demand.
(b)
Explanation of Solution
By using Equation (1), the calculation of price elasticity of demand in second case is shown below:
Price elasticity of demand=(60−40(60+402))(15−20(15+202))=(2050)(−517.5)=0.40.285714=1.4
Price elasticity of demand is 1.4.
Price elasticity of demand: Price elasticity refers to the responsiveness of changes or the change in quantity demanded due to the change in price.
(c)
Price elasticity of demand.
(c)
Explanation of Solution
By using Equation (1), the calculation of price elasticity of demand in third case is shown below:
Price elasticity of demand=(80−60(80+602))(10−15(10+152))=(2070)(−512.5)=0.285714−0.4=−0.71
Price elasticity of demand is .71.
Price elasticity of demand: Price elasticity refers to the responsiveness of changes or the change in quantity demanded due to the change in price.
(d)
Change in demand and supply.
(d)
Explanation of Solution
By using Equation (1), the calculation of price elasticity of demand in fourth case is shown below:
Price elasticity of demand=(100−80(100+802))(5−10(5+102))=(2090)(−57.5)=0.222222−0.666666=−0.33
Price elasticity of demand is .33.
Price elasticity of demand: Price elasticity refers to the responsiveness of changes or the change in quantity demanded due to the change in price.
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