Question

What is the price elasticity of the demand for skateboards, when A shop owner wants to know what the effect would be of increasing the price on skate boards he sells in his store. When skate boards cost $200, 10 people are willing to buy those skate boards. If the price increases to $300, only 7 people are willing to buy them. ?

Answer 1

Answer: The price elasticity of the demand for skateboards = 0.6.

Explanation:

Since we have given that

Original price of skate boards = $200

Quantity of skate board = 10

New price of skate boards = $300

Quantity of skate board = 7

Since we know that "Price of commodity is inversely related to quantity demanded."

So, price elasticity of demand is given by

`e_d=(\Delta q)/(\Delta p)* (P)/(Q)\\\\e_d=(10-7)/(300-200)* (200)/(10)\\\\e_d=(3)/(100)* 20\\\\e_d=(3)/(5)=0.6`

Hence, the price elasticity of the demand for skateboards = 0.6.