Question

​Willie's widgets currently sell for ​$12 each. At that​ price, Willie has sold 31 comma 000 widgets. Willie would like to maximize his​ revenue, so he raises the price of a widget to ​$15 each. Willie has seen the sales of his widgets drop only slightly to 30 comma 000. Using the​ initial-value method, the price elasticity of demand for​ Willie's widgets is nothing. ​(Enter your response as an absolute value rounded to two decimal​ places.) We can conclude that the demand for​ Willie's widgets under these conditions is

Answer 1

a). The price elasticity of demand=0.13

b). Since the price elasticity of demand is less than 1, we can conclude that the demand for Willie's widgets under these conditions is inelastic, meaning there no substantial change in demand due to his change in price

Step-by-step explanation:

a). The price elasticity of demand can be described as the percentage change in quantity demanded over a percentage change in price. This can be expressed as;

Price elasticity of demand=percentage change in quantity demanded/percentage change in price

percentage change in quantity demanded=Change in quantity/Initial quantity×100

where;

change in quantity=(30, 000-31,000)=-1,000

Initial quantity=31,000

replacing;

(-1000/31000)×100=-3.23%

percentage change in price=change in price/initial price×100

where;

change in price=(15-12)=$3

Initial price=$12

replacing;

(3/12)×100=25%

The price elasticity of demand=(3.23/25)=-0.1292 rounded of to 2 decimal and places and absolute=0.13

The price elasticity of demand=0.13

b). price elasticity of demand<1

Since the price elasticity of demand is less than 1, we can conclude that the demand for Willie's widgets under these conditions is inelastic, meaning there no substantial change in demand due to his change in price