Market demand is given as QD = 300 - 3P.Market supply is given as QS = 2P + 100.If price increases from $40 to $45,what is the price elasticity of demand?

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Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). At P = $40, QD = 300 - 3(40) = 180. At P = $45, QD = 300 - 3(45) = 165. The percentage change in quantity demanded is (165 - 180) / 180 = -0.0833. The percentage change in price is (45 - 40) / 40 = 0.125. Therefore, the price elasticity of demand is |-0.0833 / 0.125| = 0.666, which is closest to 0.8.

Market Demand Is Given as QD = 300 - 3P