If the demand function for a particular good is Q = 20 − 8P,then demand at a price of $1 is:
A) elastic.
B) unit elastic.
C) inelastic.
D) The elasticity cannot be determined.

Question

Quizplus · Accepted Answer

To determine the elasticity at a price of $1, we need to calculate the price elasticity of demand (PED) at that price point.

PED = (% Change in Quantity Demanded / % Change in Price)

At a price of $1, the demand function becomes Q = 20 - 8(1) = 12.

If the price increases by 1%, the quantity demanded will decrease by 8%.

PED = (-8%/1%) = -8

Since the absolute value of the elasticity is greater than 1, demand is considered inelastic. Therefore, the answer is C.

If the Demand Function for a Particular Good Is Q