a price of $2.00 each,SHAPE magazine sells 1 million copies of its magazine targeted to young women seeking a healthier lifestyle.If the price per issue is increased to $2.50,only 800,000 copies would be sold.From the information provided here,the price elasticity of demand for SHAPE 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 measures the percentage change in the quantity demanded in response to a percentage change in the price of a product. If the percentage change in the quantity demanded is greater than the percentage change in price, then the demand is considered elastic. In this case, we see that when the price of the magazine increases from $2.00 to $2.50, the quantity demanded falls from 1 million to 800,000, which is a percentage change in demand of (-200,000/1,000,000) = -20%. On the other hand, the percentage change in price is (2.50-2.00)/2.00 = 0.25 or 25%. Since the percentage change in quantity demanded is greater than the percentage change in price, the demand for SHAPE magazine in this price range can be described as elastic.

A Price of $2