Question

Suppose that in a week the price of ground beef decreases from $5.00 to $4.00 per pound. At the same time, the quantity of ground beef demanded at a typical grocery store increases from 9,000 to 12,000 pounds per month. What is the price elasticity of demand for ground beef?

Answer 1

The price elasticity of ground beef is -1.65.

Step-by-step explanation:

At the price level, $5 the quantity demanded is 9,000.

A decline in the price to $4 leads to an increase in the quantity demanded at 12,000.

The price elasticity of demand will be

=
`(Change\ in\ quantity\ demanded)/(Change\ in\ price)`

=
`((Q2-Q1)/(Q1) )/((P2-P1)/(P1) )`

=
`((12,000-9,000)/(9,000) )/((4-5)/(5) )`

=
`((3,000)/(9,000) )/((-1)/(5) )`

=
`(0.33)/(-0.2)`

= -1.65