Answer:
The absolute value of the elasticity of demand = 2.664.
Explanation:
a) Data and Calculations:
Change in price = $1 increase ($8 - $9)
Percentage of change in price = $1/$8 = 0.125
Change in quantity demand = 1 decrease (3 - 2)
Percentage of change in quantity demanded = 1/3 = 0.333
Price elasticity of demand = Percentage change in demand/Percentage change in price
= 0.333/0.125 = 2.664
b) Since the absolute value is more than 1, the elasticity of demand is price elastic. A change in price causes a greater change in the quantity demanded.
