A local supermarket had been charging $2.00 a pound for eggplants and selling 200 pounds a week. When it raised the price to $2.50, eggplant sales fell to 190 pounds a week. The price elasticity of demand for eggplants is:

Question

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 from 200 to 190 pounds, a decrease of 10 pounds on the original 200 pounds, which is a 5% decrease. The price increased from $2.00 to $2.50, an increase of $0.50 on the original $2.00, which is a 25% increase. Therefore, the price elasticity of demand is 5% / 25% = 0.20.

A Local Supermarket Had Been Charging $2