When the price of a watch was $25 each,the jewelry shop sold 20 per month.When it raised the price to $35 each,it sold 14 per month.The price elasticity of demand for watches is about
A) 1.66.
B) 1.06.
C) 0.94.
D) 0.60.

Question

Quizplus · Accepted Answer

The formula for price elasticity of demand is:

Elasticity = (Percent change in quantity demanded) / (Percent change in price)

Using the given information, we can calculate the percent change in quantity demanded:

Percent change in quantity demanded = ((New quantity - Old quantity) / Old quantity) x 100%

For the $25 price:

Percent change in quantity demanded = ((20 - 14) / 20) x 100% = 30%

Using the same formula for the price change:

Percent change in quantity demanded = ((14 - 20) / 14) x 100% = -42.86%

Now we can calculate the price elasticity of demand:

Elasticity = (Percent change in quantity demanded) / (Percent change in price)

Elasticity = (-42.86% / ($35 - $25) / $30) = 1.06

Therefore, the answer is B) 1.06.

When the Price of a Watch Was $25 Each,the Jewelry