The elasticity of demand can be calculated by dividing the percentage change in the quantity demanded of a good or service by the percentage change in price.
The data for point C are: Price=$6, Quantity=8
The data for point D are: Price=$4, Quantity=12
The percent change in the quantity demanded is:
[tex]\begin{gathered} pc1=\frac{12-8}{8} \\ pc1=\frac{4}{8} \\ pc1=0.5 \end{gathered}[/tex]
We calculated the ratio instead of the percentage, but it will work fine.
The percent change in price is:
[tex]\begin{gathered} pc2=\frac{4-6}{6} \\ pc2=-\frac{2}{6} \\ pc2=-0.33 \end{gathered}[/tex]
The elasticity of demand is:
[tex]\begin{gathered} e=\frac{0.5}{-0.33} \\ e=-1.5 \end{gathered}[/tex]
Since the absolute value of the elasticity is greater than one, the demand is said to be elastic.
