If the price of a product increases from $15 to $17 per unit and the quantity demanded decreases from 75 to 50 units,then the price elasticity of demand for this product is _____
A)3.2.
B)12.5.
C)17.
D)2.
E)40.

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: [(Q2 - Q1) / (Q2 + Q1) / 2] / [(P2 - P1) / (P2 + P1) / 2], where Q1 and Q2 are the initial and final quantities demanded, and P1 and P2 are the initial and final prices. Plugging in the given values: [(50 - 75) / (50 + 75) / 2] / [(17 - 15) / (17 + 15) / 2] = (-25 / 62.5) / (2 / 16) = -0.4 / 0.125 = -3.2. The negative sign indicates the direction of the change, but elasticity is often reported in absolute terms, making the correct answer 3.2.

If the Price of a Product Increases from $15 to $17