Question

1.“A fall in the price of cabbage from $ 10.50 to $ 9. 50 per bushel increases the quantity demanded from 18,800 to 21,200 bushels. The price elasticity of demand is”0.81.21258

Answer 1

1.2

Explanation:

We have the following:

Elasticity = Percentage change in quantity demanded/Percentage change in price. Therefore:

`e=\frac{\frac{Q_2-Q_1}{(Q_2+Q_1)\text{/2}}}{\frac{P_2-P_1}{(P_2+P_1)\text{/2}}}`

Replacing:

`e=\frac{\frac{21200-18800}{(21200+18800\text{)/2}}}{\frac{10.50-9.50}{(10.5+9.50)\text{ /2}}}=((2400)/(20000))/((1)/(10))=(24000)/(20000)=1.2`

The price elasticity of demand is 1.2