Scenario 5.1
The demand for noodles is given by the following equation: Q = 20 - 4P + 0.2I - 2P x . Assume that P = $8, I = 200, and P x = $10.
-If a 10 percent increase in the price of tomatoes leads to a 20 percent decrease in quantity demanded, then the price elasticity of demand for tomatoes, , equals -2.

Question

Quizplus · Accepted Answer

Given that a 10% increase in price of tomatoes leads to a 20% decrease in quantity demanded, we can use the price elasticity of demand formula:
% change in quantity demanded / % change in price = elasticity
Substituting the values, we get:
-20% / 10% = -2

Therefore, the price elasticity of demand for tomatoes equals -2.

Scenario 5.1 The Demand for Noodles Is Given by the Following Equation