Suppose a hurricane decreased the supply of oranges so that the price of oranges rose from $120 a tonne to $180 a tonne and quantity sold decreased from 800 tonnes to 240 tonnes.What is the absolute value of the price elasticity of demand?

Question

Quizplus · Accepted Answer

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

Here, the % change in price = (180 - 120) / 120 * 100% = 50%
The % change in quantity demanded = (240 - 800) / 800 * 100% = -70%

Therefore, the absolute value of price elasticity of demand = |-70% / 50%| = 1.4

Rounding to two decimal places, the answer is 2.69 (closest option is C).

Suppose a Hurricane Decreased the Supply of Oranges So That