When a stationery store increases its price for a popular computer notebook from $1,000 to $1,250,its quantity demanded decreases from 400 to 250 per month.Its price elasticity of demand (expressed as a positive number)equals ________.
A) 1.11
B) 2.07
C) 2.30
D) 2.50

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: |(ΔQ/Q_avg) / (ΔP/P_avg)|, where ΔQ is the change in quantity demanded, Q_avg is the average quantity demanded, ΔP is the change in price, and P_avg is the average price. Here, ΔQ = 250 - 400 = -150, Q_avg = (250 + 400) / 2 = 325, ΔP = 1250 - 1000 = 250, and P_avg = (1250 + 1000) / 2 = 1125. Plugging these into the formula gives |(-150/325) / (250/1125)| = |(-0.4615) / (0.2222)| ≈ 2.07.

When a Stationery Store Increases Its Price for a Popular