Question

Suppose that during the past year, the price of a laptop computer rose from $2,750 to $2,880. During the same time period, consumer sales decreased from 446,000 to 321,000 laptops.

Answer 1

Answer: Elasticity of demand is 7.06

Explanation:

P1= $2,750

P2=$2,880

Q1=446,000

Q2=321,000

$Elasticity = \frac{Q2 - Q1}{\frac{Q1 + Q2}{2} } * \frac{\frac{P1 + P2}{2} }{P2 - P1}$

$Elasticity = \frac{321,000 - 446,000}{\frac{446,000 + 321,000}{2} } * \frac{\frac{2750 + 2880}{2} }{2880 - 2750}$

$Elasticity = \frac{-125,000}{383,500} * \frac{2815}{130}$

$Elasticity = - 0.3259*21.6598$

Elasticity = -0.76

Thus, elasticity of demand for laptops is 7.06. This means that laptops are highly price elastic as it is greater than 1.