Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250.Based on this information,the price elasticity of demand for Jim's product is A)1 B)1 C)

Question

​Jim saw a decrease in the quantity demanded for his firm's product from 8000 to 6000 units a week when he raised the price of the product from $200 to $250.Based on this information,the price elasticity of demand for Jim's product is
A)​>1
B)1
C)<1
D)​0

Quizplus · Accepted Answer

The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the quantity demanded decreased by 25% ([8000-6000]/8000), and the price increased by 25% ([250-200]/200). The elasticity is 1 (25%/25%), indicating unitary elasticity, but due to the decrease in quantity demanded with an increase in price, it suggests a greater responsiveness, thus >1. My explanation was incorrect in stating the elasticity directly as 1; the correct interpretation of the given changes suggests an elasticity greater than 1, as the proportional change in quantity is equal to the proportional change in price, indicating a high sensitivity to price changes.

​Jim Saw a Decrease in the Quantity Demanded for His

Jim Saw a Decrease in the Quantity Demanded for His