Question

PLT restaurant sold 2,500 lunch boxes during the past month with a price of $10.00 per lunch box. During this month, the price of a lunch box is increased by $5.00 and the total number of lunch boxes sold now is 2,200. What is the price elasticity of demand

Answer 1

Answer:

0.24

Explanation:

PLT restaurant sold 2500 lunch boxes for $10 last month

This month they sold increase price by $5 and sold 2,200 boxes

The first step is to calculate the percentage change in quantity

= 2500-2000/2500 × 100

= 300/2500 × 100

= 0.12 × 100

= 12%

The percentage change in price can be calculated as follows

= 10-5/10 × 100

= 5/10 × 100

= 0.5 × 100

= 50%

Therefore the price elasticity of demand can be calculated as follows

= 12%/50%

= 0.24