Question

If the number of memberships at the local gym increased from 400 to 500 when the membership price fell from $48 to $40 per month, the absolute value of the price elasticity of demand coefficient, rounded to one decimal place, is:

Answer 1

The price elasticity of demand coefficient, rounded to one decimal place is 1.5

How to calculate price elasticity of demand

Change in price = $48 - $40

= $8

% change in price = 8/48 × 100

= 16.67%

change in quantity demanded = 500 - 400

= 100

% change in quantity demanded = 100/400 × 100

= 25%

Price Elasticity of Demand = percent change in quantity ÷ percent change in price

= 25% ÷ 16.67%

= 1.49970005998800

Approximately, 1.5

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