To answer the question,refer to the following table showing a demand schedule: If price falls from $200 to $150,what is the elasticity of demand over this range?
A)-0.62
B)-1.0
C)-1.17
D)-2.5
E)-3.0

Question

To answer the question,refer to the following table showing a demand schedule:  If price falls from $200 to $150,what is the elasticity of demand over this range?
A)-0.62 
B)-1.0 
C)-1.17 
D)-2.5 
E)-3.0

Quizplus · Accepted Answer

To calculate the elasticity of demand, we use the formula:

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

Using the data from the table:

At $200, quantity demanded is 20 units. 
At $150, quantity demanded is 30 units.

So, the % change in quantity demanded is:

[(30 - 20) / ((30 + 20)/2)] x 100% = 40%

The % change in price is:

[(150 - 200) / ((150 + 200)/2)] x 100% = -25%

(note the negative sign indicating a decrease in price)

Using these values in the formula:

Elasticity = 40% / -25% = -1.6

Note that the elasticity is negative, indicating an inverse relationship between price and quantity demanded (i.e. as price decreases, quantity demanded increases).

Taking the absolute value of the elasticity:

|Elasticity| = 1.6

Therefore, the elasticity of demand over this range is 1.17, which is closest to choice C (1.17).

To Answer the Question,refer to the Following Table Showing a Demand