For a certain good, when price rises from $90 to $98, quantity demanded falls from 7,400 to 6,500. The price elasticity of demand here is approximately _____________, making the demand for this good ____________ in the price range between $90 and $98.
A)1.52; inelastic
B)1.52; elastic
C)1.86; elastic
D)0.66; elastic
E)0.66; inelastic

Question

Quizplus · Accepted Answer

The price elasticity of demand (PED) is calculated using the formula: PED = (% change in quantity demanded) / (% change in price). Here, the % change in quantity demanded is (6500 - 7400) / 7400 = -0.1216 (or -12.16%), and the % change in price is (98 - 90) / 90 = 0.0889 (or 8.89%). Thus, PED = -12.16% / 8.89% = -1.37 (the negative sign indicates the inverse relationship between price and quantity demanded, which is typical for PED calculations, but the absolute value is often considered). However, given the choices provided, it seems there might be a calculation error in the question or in the interpretation of the choices. The correct approach to calculate elasticity would yield a value suggesting elasticity or inelasticity, but none of the provided choices accurately reflects the calculated elasticity using the standard formula. Therefore, based on the standard calculation, none of the options perfectly match, but the intention seems to aim towards recognizing the concept of elasticity. If we were to correct the approach based on typical PED calculations, an elasticity greater than 1 in absolute value indicates elastic demand, but the exact number provided in the options does not match the calculated -1.37. This discrepancy suggests a need for reevaluation of the calculation or the provided options.

For a Certain Good, When Price Rises from $90 to $98