assume that the income is $10,000, the price of the related good is $40, and Conlan chooses to set the price of this product at $30.
-At the prices and income given above, what is the price elasticity of demand?
A) -0.43
B) -0.86
C) -1.00
D) -1.43
E) -2.40

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. In this case, the price decreases from $40 to $30, a 25% decrease. The quantity demanded increases from 250 to 333.33, a 33.33% increase. Therefore, the price elasticity of demand is -1.3333 / 0.25 = -5.3333. The closest answer choice is -1.43, which is choice A.

Assume That the Income Is $10,000, the Price of the Related