225k views
2 votes
What is the formula to calculate a seg drop or raise?

User Iouri
by
8.2k points

1 Answer

4 votes

Final answer:

To calculate price elasticity of demand as price decreases from $70 to $60, compute the percentage change in quantity and price, then divide the percentage change in quantity by the percentage change in price. This method is an approximation for small changes.

Step-by-step explanation:

To calculate the price elasticity of demand as the price decreases from $70 at point B to $60 at point A, you can use the following steps:

Calculate the percentage change in quantity by taking the difference between the new quantity and the original quantity, divide by the average of the two quantities, and then multiply by 100. For example, with a change in quantity from 3,000 to 2,800, you would do (3,000 - 2,800) / ((3,000 + 2,800) / 2) * 100, which equals approximately 6.9%.

Calculate the percentage change in price by taking the difference between the new price and the original price, divide by the average of the two prices, and then multiply by 100. With a price change from $70 to $60, it would be (60 - 70) / ((60 + 70) / 2) * 100.

Divide the percentage change in quantity by the percentage change in price to get the elasticity.

Note that this equation provides an approximation for small changes in the levels. For more accurate measures, one should use the initial formula.

User ChrisN
by
8.1k points

Related questions

1 answer
5 votes
95.0k views
asked Aug 24, 2024 85.9k views
FRiSi asked Aug 24, 2024
by FRiSi
7.3k points
1 answer
1 vote
85.9k views
asked Jun 6, 2024 105k views
David Vasquez asked Jun 6, 2024
by David Vasquez
7.6k points
2 answers
5 votes
105k views