Respuesta :
Answer:
-0.33
Explanation:
Price elasticity of demand is defined as the degree of responsiveness of change in demand w.r.t change in the price. It can be calculated using the following method:
Percentage change in quantity = [tex]\frac{Q_{2}\ -\ Q_{1} }{\frac{Q_{2}\ +\ Q_{1} }{2} }[/tex] × 100
wherein [tex]Q_{2}[/tex] = Current quantity demanded i.e 425 units
[tex]Q_{1}[/tex]= Original quantity demanded i.e 400 units
= [tex]\frac{425\ -\ 400 }{\frac{425\ +\ 400 }{2} }[/tex] × 100
= [tex]\frac{25}{412.5}[/tex] × 100
= 6.061%
Similarly, percentage change in price = [tex]\frac{P_{2}\ -\ P_{1} }{\frac{P_{2} \ +\ P_{1} }{2} }[/tex] × 100
where, [tex]P_{2}[/tex] = Changed price i.e $ 1.25
[tex]P_{1}[/tex] = Original price i.e $1.5
= [tex]\frac{1.25\ -\ 1.5 }{\frac{1.25 \ +\ 1.5 }{2} }[/tex] × 100
= [tex]\frac{-0.25}{1.375}[/tex] × 100
= - 18.18 %
Now, price elasticity of demand is given by,
= [tex]\frac{Percentage\ change\ in\ quantity}{Percentage\ Change\ in\ price}[/tex] = [tex]\frac{6.061}{18.18}[/tex] = - 0.33
This conveys that price elasticity of demand is inelastic.
