-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7.50 to $7?
A) 10
B) 1.38
C) 0.724
D) 0.1

Question

-Refer to the above table. What is the absolute price elasticity of demand if a price falls from $7.50 to $7?
A) 10 
B) 1.38 
C) 0.724 
D) 0.1

Quizplus · Accepted Answer

The absolute price elasticity of demand is calculated using the formula: |(ΔQ/Q) / (ΔP/P)|, where ΔQ is the change in quantity demanded, Q is the initial quantity demanded, ΔP is the change in price, and P is the initial price. Without specific quantities, we can't calculate it directly, but given the options and the typical behavior of demand in response to price changes, an elasticity of 1.38 suggests a relatively elastic demand scenario, where a decrease in price leads to a proportionately larger increase in quantity demanded. This is a reasonable outcome in many markets, making option B the most plausible choice without specific data.

-Refer to the Above Table