Question

Suppose that mimi plays golf 5 times per month when the price is $40 and 4 times per month when the price is $50. what is the price elasticity of mimi's demand curve?

a) 10.0
b) 0.8
c) 0.1
d) 1.0

Answer 1

The price elasticity of Mimi's demand for golf is calculated using the price elasticity formula, resulting in an elasticity of 0.8, which corresponds to option (b).

Step-by-step explanation:

To calculate the price elasticity of Mimi's demand for golf, we use the formula for elasticity: elasticity = (% change in quantity demanded) / (% change in price). The change in quantity is 5 plays per month to 4 plays per month (a decrease of 1), and the change in price is from $40 to $50 (an increase of $10).

The percentage change in quantity demanded is (1/5) * 100 = 20%. The percentage change in price is (10/40) * 100 = 25%. Therefore, the elasticity = 20% / 25% = 0.8, option (b).