At a price of $3 each, SHAPE magazine sells 1.25 million copies of its magazine targeted to young women seeking a healthier lifestyle. If the price per issue is increased to $3.25 each, only 1 million copies will be sold. For the information provided, the price elasticity of demand for SHAPE magazine in this price range can be described as:
A)elastic demand.
B)unitary demand.
C)null elasticity.
D)inelastic demand.

Question

Quizplus · Accepted Answer

The price elasticity of demand measures how much the quantity demanded of a good responds to a change in the price of that good. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. In this case, when the price increases from $3 to $3.25 (an 8.33% increase), the quantity demanded decreases from 1.25 million copies to 1 million copies (a 20% decrease). Since the percentage change in quantity demanded is greater than the percentage change in price, the demand is considered elastic.

At a Price of $3 Each, SHAPE Magazine Sells 1