For a certain good,when price rises from $50 to $55,quantity demanded falls from 8,400 to 7,500.The price elasticity of demand here is _____________,making the demand for this good ____________ in the price range between $50 and $55.
A) 1.19; inelastic
B) 1.19; elastic
C) 1.45; elastic
D) 0.84; elastic
E) 0.84; inelastic

Question

Quizplus · Accepted Answer

The formula for price elasticity of demand is:

Price elasticity of demand = (percentage change in quantity demanded) / (percentage change in price)

Using the given data:

Percentage change in quantity demanded = ((7,500 - 8,400) / 8,400) x 100% = -10.71%
Percentage change in price = ((55 - 50) / 50) x 100% = 10%

Price elasticity of demand = (-10.71 / 10) = -1.071

Since elasticity is a positive value, we take the absolute value of -1.071 which gives 1.071.

A price elasticity of demand greater than 1 (in absolute value) means that the demand for this good is elastic, i.e., a change in price leads to a greater percentage change in quantity demanded. Therefore, the best choice is B: 1.19; elastic.

For a Certain Good,when Price Rises from $50 to $55,quantity