At a price of $3 each,SHAPE magazine sells 1.25 million copies of its magazine targeted to young women seeking a healthier lifestyle.If the price per issue is increased to $3.25 each,only 1 million copies will be sold.For the information provided,the price elasticity of demand for SHAPE magazine in this price range can be described as:
A)inelastic demand.
B)elastic demand.
C)unitary demand.
D)null elasticity.

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 increased from $3 to $3.25, which is a 8.33% increase. The quantity demanded decreased from 1.25 million to 1 million, which is a 20% decrease. Thus, the price elasticity of demand is 20%/8.33% = 2.4, which is greater than 1. This indicates that the demand for SHAPE magazine is elastic, meaning that a 1% increase in price results in a more than 1% decrease in quantity demanded.

At a Price of $3 Each,SHAPE Magazine Sells 1