Question

The local baseball stadium's concession stands previously sold hot dogs for 80 cents apiece. At that price, when a baseball fan went to watch a baseball game, he bought 2 hotdogs. But now that the stadium has a "dime-a-dog night," he has purchased 6 hot dogs. What is the approximate value of this individual's absolute price elasticity of demand for hot dogs?

Answer 1

Answer:

0.64

Explanation:

The computation of the absolute price elasticity of demand is shown below:

As we know that

$=\frac{\Delta Q}{\Delta P}\times\frac{P_1+P_2}{Q_1+Q_2}$

Where,

Change in Quantity demanded = 6 - 2 = 4

Change in price = $80 - $10 = 70

$P_1$ = 10

$P_2$ = 80

$Q_1$ = 2

$Q_2$ = 6

Now placing these values to the above formula

so, the price elasticity of demand is

= ((6 - 2) ÷ (80 - 10)) × (10 + 80) ÷ (2 + 6)

= 0.64