Suppose a good has a demand curve given by Q = 20 - 8 × P.What is the price elasticity of demand if the price is $2?
A) -4
B) -1/16
C) 1/2
D) -1/2

Question

Quizplus · Accepted Answer

The price elasticity of demand (PED) is calculated using the formula: PED = (% change in quantity demanded) / (% change in price). Given the demand curve Q = 20 - 8P, we first differentiate Q with respect to P to get dQ/dP = -8. At P = $2, Q = 20 - 8*2 = 4. The PED formula can also be expressed as (dQ/dP) * (P/Q). Substituting the values, we get (-8) * (2/4) = -4, indicating that the price elasticity of demand at a price of $2 is -4.

Suppose a Good Has a Demand Curve Given by Q