Question

Suppose the price of apples falls from $30 to #20, and the number of apples sold increases from 70 to 80. What is (the absolute value of) the price elasticity of demand? Is the demand for apples inelastic or elastic?a. .43, elasticb. .14, inelasticc. .14, elasticd. .43, inelastic

Answer 1

d. 0.43, inelastic

Step-by-step explanation:

The price elasticity of demand measures how the quantity demanded of a good or service responds to change in price of that good or service.

The formula is:

PED= % change in quantity demanded/ % change in price

For this problem:

%Change in quantity demanded= (q2-q1/q1) = (80-70)/70= 1/7

%Change in price = ( p2-p1/p1)= (20-30)/30= -1/3

PED= (1/7)/(-1/3)= -3/7 in absolute value = 3/7= 0.428=0.43

If the PED is less than 1 then it is considered as inelastic.

Answer 2

The correct answer is option d.

Step-by-step explanation:

The price elasticity of demand for apples will be

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

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

=
`((80-70)/(70) )/((20-30)/(30) )`

=
`((10)/(70) )/((-10)/(30) )`

= -0.43

The elasticity of demand is less than 1, this indicates that the demand is inelastic.