At a price of $3 each, SH$\Lambda$PE 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 $3.25 each, only 1 million copies will be sold.For the information provided, the price elasticity of demand for SH$\Lambda$PE magazine in this price range can be described as
A)inelastic demand.
B)elastic demand.
C)unitary demand.
D)null elasticity.
E)subsidized elasticity.

Question

Quizplus · Accepted Answer

The price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. In this case, the percentage change in price is (3.25-3)/3 = 8.33%, and the percentage change in quantity demanded is (1,000,000-1,250,000)/1,250,000 = -20%. Using the formula, we get:

Elasticity = (-20%/8.33%) = -2.4

Since the elasticity is greater than 1, the demand is considered elastic, meaning that a small increase in price leads to a relatively large decrease in quantity demanded. Therefore, the best choice is B) elastic demand.

At a Price of $3 Each, SH Λ\LambdaΛ PE Magazine Sells 1

At a Price of $3 Each, SH $\Lambda$ PE Magazine Sells 1