Question

Suppose the demand function for a good is expressed as Q=100-4p. If the good currently sells for 10, what is the price elasticity equal to? a)-4 b)-1.5 c) -0.67 d) -2.5

Answer 1

Answer:

c)-0.67

Explanation:

Calculation to determine what the price elasticity equal to

Using this formula

Price Elasticity of Demand (PED)=dQ/dP*Q/P

Let plug in the formula

Price Elasticity of Demand (PED)=d(100-4p)/dp*p/100-4p

Price Elasticity of Demand (PED)=-4*p/100-4p

at p=$10

Price Elasticity of Demand (PED)=-4*$10/100-4($10)

Price Elasticity of Demand (PED)=-40/60

Price Elasticity of Demand (PED)=-2/3

Price Elasticity of Demand (PED)=-0.666

Price Elasticity of Demand (PED)=-0.67 Approximately

Therefore the price elasticity equal to -0.67