Advanced Placement (AP) College

The original price of a box of facial tissues is $3, the original quantity is 8000 boxes. The new price is $3.50 and the new quantity is 7500 boxes. Find the price elasticity of demand. Is it elastic or inelastic?
Question 4 options:

.375, inelastic

2.67, elastic

2.14, inelastic

.467, elastic

Answers

Answer 1

Answer:

0.467, inelastic

Explanation:

The price elasticity of demand can be calculated using the following formula:

% Change in Quantity Demanded / % Change in Price

Using this formula:

(7500 - 8000) / 8000 = -0.0625

(-0.0625) / (3.5 - 3) / 3 = -0.467

So the price elasticity of demand is -0.467.

When the price elasticity of demand is between -1 and -0, it is considered inelastic. Since -0.467 is between -1 and -0, the demand is considered inelastic.

Therefore, the answer is 0.467, inelastic

Answer 2

The price elasticity of demand is 0.467, and it is inelastic in nature. When the price elasticity of demand is between -1 and -0, it is considered inelastic. Since -0.467 is between -1 and -0, the demand is considered inelastic.

Thus, the last option is the correct answer.

What is price elasticity of demand?

The price elasticity of demand is the ratio of the percentage change in quantity demanded to the percentage change in price for a product. Economists use it to understand how supply and demand change when the price of a product changes.

The price elasticity of demand can be calculated using the following formula:

% Change in Quantity Demanded / % Change in Price

% Change in Quantity Demanded= (7500 - 8000) / 8000 = -0.0625

Price elasticity of demand = (-0.0625) / (3.5 - 3) / 3

                                            = -0.467

Therefore, the price elasticity of demand is -0.467.

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