The point price elasticity of demand for red herring is -4. The demand curve for red herring is: Q = 120 - P. What is the price of red herring?

Question

Quizplus · Accepted Answer

The point price elasticity of demand formula is (dQ/dP) * (P/Q). Given elasticity is -4, and the demand curve is Q = 120 - P, so dQ/dP = -1. Substituting these into the elasticity formula: -4 = (-1) * (P/(120-P)). Solving for P gives P = $96.

The Point Price Elasticity of Demand for Red Herring Is