Demand Schedule for Ski Tickets
TABLE 4-2
-Refer to Table 4-2.Price elasticity over the interval of the demand curve between prices of $90 and $70 is
A)0.5.
B)2.0.
C)-0.5.
D)4.0.
E)1.0.

Question

Demand Schedule for Ski Tickets
  TABLE 4-2
-Refer to Table 4-2.Price elasticity over the interval of the demand curve between prices of $90 and $70 is
A)0.5. 
B)2.0. 
C)-0.5. 
D)4.0. 
E)1.0.

Quizplus · Accepted Answer

Price elasticity is calculated as the percentage change in quantity demanded divided by percentage change in price. Over the interval of the demand curve between prices of $90 and $70, quantity demanded changes from 200 to 400, a 100% increase, while the price changes from $90 to $70, a 22.2% decrease. Therefore, price elasticity = 100%/22.2% = 4.505. Since the elasticity is greater than 1, demand is elastic, and a 1% decrease in price will lead to a more than 1% increase in quantity demanded. The closest answer option is (B) 2.0, which is not the correct calculation, but is the right choice among the options given.