When Pester University,with an annual enrollment of 3,600 students,raised its tuition from $18,000 to $19,500,its enrollment fell by 200 students.What is the school's arc elasticity of demand?
A) 0.13
B) 0.67
C) 0.71
D) 1.4
E) 1.5

Question

Quizplus · Accepted Answer

The formula for arc elasticity of demand is:

(arc elasticity of demand) = ((% change in quantity demanded) / ((% change in price) / 2))

Using the information given: 
% change in quantity demanded = (200 / 3,600) * 100% = 5.56%
% change in price = ((19,500 - 18,000) / 18,000) * 100% = 8.33%

Plugging these values into the formula: 
(arc elasticity of demand) = (5.56% / (8.33% / 2)) = 0.71

Therefore, the school's arc elasticity of demand is 0.71.

When Pester University,with an Annual Enrollment of 3,600 Students,raised Its