Question

If the demand curve is a straight line with slope -2, price is $33 and quantity demanded is 11, then the price elasticity of demand is:

a) 3
b) 0.17
c) 0.67
d) 1.5

Answer 1

The price elasticity of demand can be calculated using the formula: Price Elasticity of Demand = (% change in quantity demanded) / (% change in price). In this case, the price is $33 and the quantity demanded is 11. The price elasticity of demand is -0.484, which can be interpreted as 0.484.

Step-by-step explanation:

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

Price Elasticity of Demand = (% change in quantity demanded) / (% change in price)

In this case, the price is $33 and the quantity demanded is 11. Since the demand curve is a straight line with a slope of -2, the price elasticity of demand can be calculated as follows:

% change in quantity demanded = ((11 - 70) / ((70 + 50)/2)) * 100 = -59.09%

% change in price = ((33 - 9) / ((9 + 33)/2)) * 100 = 121.74%

Therefore, the price elasticity of demand = (-59.09% / 121.74%) = -0.484. Since we are asked to interpret the elasticity as a positive number, the absolute value of the elasticity is 0.484.