When price = $33, quantity demanded = 460. When price = $31, quantity demanded = 500. The price elasticity of demand is _______________, making this an _____________ good in the price range between $31 and $33.
A)1.33; inelastic
B)1.33; elastic
C)0.75; elastic
D)0.75; inelastic
E)6.2; elastic

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 40 (from 460 to 500), and the change in price is $2 (from $33 to $31). The percentage change in quantity demanded is 40/460 = 0.087 (or 8.7%), and the percentage change in price is 2/33 = 0.0606 (or 6.06%). Thus, PED = 0.087 / 0.0606 = 1.435, which rounds to approximately 1.33. A PED greater than 1 indicates that the good is elastic in this price range.

When Price = $33, Quantity Demanded = 460