You have the following demand equation for a pack of cigarettes: Q = 200 - 0.30P with the average quantity 3 packs and average price $3.00 per pack.What is the price elasticity?
A)0.30
B)-0.30
C)1.0
D)-1.0

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, the average quantity demanded is 3 packs and the average price is $3.00 per pack. If the price increases by 1%, the quantity demanded will decrease by 0.30%. Therefore, the price elasticity of demand is -0.30.

You Have the Following Demand Equation for a Pack of Cigarettes