When the price of corn dogs is $0.50,10,000 corn dogs are demanded.When the price of corn dogs is $1.20,5,000 are demanded.What is the price elasticity of demand for corn dogs?

Question

Quizplus · Accepted Answer

Elasticity of demand formula = % change in quantity demanded / % change in price
% change in quantity demanded = (new quantity - old quantity) / old quantity * 100
% change in price = (new price - old price) / old price * 100

Using the above formula:

% change in quantity demanded = (5000 - 10000) / 10000 * 100 = -50%
% change in price = (1.20 - 0.50) / 0.50 * 100 = 140%

Elasticity of demand = -50% / 140% = -0.357

Since the answer is expected in absolute terms, the elasticity of demand is 0.357, which is less than 1, making it relatively inelastic. Therefore, the best choice is B because it is the only option with a value less than 1.

When the Price of Corn Dogs Is $0