When the price of a pair of shoes is $80,10 pairs are demanded.When the price of the pair of shoes is $60,20 pairs are demanded.Using the initial value,the price elasticity of demand is ________ starting at a price of $80 and ________ starting at a price of $60.
A) 2; 3
B) 3/2; 4
C) 3; 2
D) 4; 3/2

Question

Quizplus · Accepted Answer

We can use the formula for price elasticity of demand:

E = (% Change in Quantity Demanded) / (% Change in Price)

To find the % change in quantity demanded, we can use:

% Change in Quantity Demanded = (New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded

Starting at a price of $80:

% Change in Quantity Demanded = (20 - 10) / 10 = 1

To find the % change in price, we can use:

% Change in Price = (New Price - Old Price) / Old Price

% Change in Price = (60 - 80) / 80 = -0.25

Using these values, we can calculate the price elasticity of demand:

E = 1 / -0.25 = -4

Since the price elasticity of demand is negative, we can take the absolute value to get:

E = 4

Starting at a price of $60, we can follow the same steps:

% Change in Quantity Demanded = (10 - 20) / 20 = -0.5

% Change in Price = (80 - 60) / 60 = 0.33

E = (-0.5) / 0.33 = -1.5

Taking the absolute value, we get:

E = 1.5

Therefore, the price elasticity of demand is 4 starting at a price of $80, and 1.5 starting at a price of $60. The closest answer choice is D.

When the Price of a Pair of Shoes Is $80,10