Question

Use this demand schedule to answer the first 3 questions of this assignment:

Price Quantity
$20 12
$18 17
$16 20
$14 24
$12 30
$10 36
$ 8 40
$ 6 44
$ 4 48
Using the above table, over which range is the price elasticity of demand inelastic?

Answer 1

The price elasticity of demand is inelastic over the range of $6 to $20.

• The price elasticity of demand measures the responsiveness of quantity demanded to changes in price.
• When the price elasticity of demand is inelastic, it means that the percentage change in quantity demanded is less than the percentage change in price.
• In other words, demand is relatively unresponsive to price changes within that range.
• In this case, looking at the demand schedule provided, we can see that the price elasticity of demand is inelastic over the range of $6 to $20.
• This is because the percentage change in quantity demanded is less than the percentage change in price as we move from $6 to $20.
• For example, when the price decreases from $6 to $4, the quantity demanded increases from 44 to 48, which is a percentage change of 9.09%.
• However, the percentage change in price is 33.33%.
• Since the percentage change in quantity demanded is smaller than the percentage change in price, the price elasticity of demand is inelastic within this range.