For demand function P = 24 - 6Q

Question

Quizplus · Accepted Answer

The formula for elasticity of demand is % change in quantity demanded / % change in price. When the price is 16, the quantity demanded can be calculated by setting the price equal to the demand function: 16 = 24 - 6Q. Solving for Q, we get Q = 4. When the price decreases by 10% to 14.40, the quantity demanded increases from 4 to 5, which is a 25% increase. Therefore, the elasticity of demand is (% change in quantity demanded / % change in price) = (25% / 10%) = 2.5, which is greater than 1. This means that demand is elastic at price 16.

Option B and C cannot be the answer since the percentage change in quantity demanded is not greater than the percentage change in price at those prices, which means the demand is inelastic. Option D is also not the answer because the elasticity of demand varies depending on the price.

For Demand Function P = 24 - 6Q