Suppose that Percy eats a 200-gram steak eight times per month when the price is $10 and six times per month when the price is $12. What is the price elasticity of Percy's demand curve?

Question

Quizplus · Accepted Answer

First, we need to calculate the average quantity of steak consumed by Percy per month:

Average quantity = (8 times per month x 200 grams per time) + (6 times per month x 200 grams per time) / 2 = 1600 grams per month / 2 = 800 grams per month.

Next, we need to calculate the percentage change in quantity demanded divided by the percentage change in price:

Price elasticity = ((1600 - 960) / ((1600 + 960) / 2)) / ((12 - 10) / ((12 + 10) / 2)) = 0.636.

Therefore, the price elasticity of Percy's demand curve is 0.636, which indicates that his demand is relatively inelastic.

Suppose That Percy Eats a 200-Gram Steak Eight Times Per