Below are some data on price,income and demand for five different time periods.

-Refer to the information above to answer this question.What is the price elasticity of demand for product X between years 1 and 2?
A)0.31.
B)1.0.
C)3.2.
D)22.2.

Question

Below are some data on price,income and demand for five different time periods.
 
-Refer to the information above to answer this question.What is the price elasticity of demand for product X between years 1 and 2?
A)0.31. 
B)1.0. 
C)3.2. 
D)22.2.

Quizplus · Accepted Answer

To calculate price elasticity of demand, we need to use the formula:

Price elasticity of demand = ((% change in quantity demanded) / (% change in price))

Using the data provided in the table, we can calculate the percentage change in quantity demanded between year 1 and year 2:

((50 - 40) / ((50 + 40) / 2)) * 100 = 25%

We can also calculate the percentage change in price between year 1 and year 2:

((10 - 8) / ((10 + 8) / 2)) * 100 = 25%

Substituting these values in the formula, we get:

Price elasticity of demand = (25% / 25%) = 1

Therefore, the price elasticity of demand for product X between years 1 and 2 is 1, which means that the demand for the product is unit elastic. Option C is the correct choice.

Below Are Some Data on Price,income and Demand for Five