Question

Ghose and Han​ (2014) found that the elasticity of demand for Google Play apps is negative 3.7. This elasticity applies to a small college town where approximately​ 1,000 apps per month are sold. If price rises by 8​%, what would be the effect on quantity​ demanded?

Answer 1

- 29.6%

Step-by-step explanation:

Data provided in the question:

The elasticity of demand for Google Play apps = -3.7

Number of apps sold per month = 1,000

Percentage increase in the price = 8%

Now,

Elasticity of demand = [ % change in quantity ] ÷ [ %change in price ]

thus,

-3.7 = [ % change in quantity ] ÷ 8%

or

% change in quantity = -3.7 × 8%

or

% change in quantity = - 29.6%