Question

For a certain good, when price rises from $90 to $98, quantity demanded falls from 7,400 to 6,500. The price elasticity of demand here is approximately _____________, making the demand for this good ____________ in the price range between $90 and $98.

Answer 1

Answer:

The price elasticity of demand here is approximately 1.52 and making the demand for this good elastic in the price range between $90 and $98.

Explanation:

In this question, we use the formula of price elasticity of demand which is shown below:

Price elasticity of demand = Percentage change in quantity demanded ÷ Percentage change in price

where,

Percentage change in quantity demanded is calculated by

=  New Quantity - Old quantity ÷ New Quantity + Old quantity

= 7,400 - 6,500 ÷ 7,400 + 6,500

= 900 ÷ 13,900

= 0.06474

Percentage change in price is calculated by

=  New price - Old price ÷ New price + Old price

= 98 - 90 ÷ 98 + 90

= 8 ÷ 188

= 0.04255

Now put these values over the above formula

So, the answer is =  0.06474 ÷  0.04255 = 1.52

The demand for this good is elastic because it is greater than 1.

Hence, the  price elasticity of demand here is approximately 1.52 and making the demand for this good elastic in the price range between $90 and $98.