Question

Question 46 options:

We're looking at the market for cat food. When the price is $10, the quantity sold is 1000 bags. When the price drops 10%, the quantity sold increases 30%.
Calculate the price elasticity of demand. (Answer in format X.XX, round to the nearest hundredth.)

Is the outcome elastic or inelastic?

Answer 1

elastic

Step-by-step explanation:

The price elasticity of demand can be calculated using the formula:

% change in quantity demanded / % change in price

So, with the given information, we can calculate it as follows:

30% / -10% = -3

The price elasticity of demand is -3, which indicates that the demand for cat food is elastic. This means that a change in price results in a larger proportional change in the quantity demanded, so the demand for cat food is sensitive to price changes.