Question

Suppose that during the past year, the price of a laptop computer rose from $2,750 to $2,880. During the same time period, consumer sales decreased from 446,000 to 321,000 laptops.

Calculate the elasticity of demand between these two price,quantity combinations by using the following steps. After each step, complete the relevant part of the table with the appropriate answers. (Note: For decreases in price or quantity, enter values in the Change column with a minus sign.)

Answer 1

To calculate the elasticity of demand, use the formula: percentage change in quantity divided by the percentage change in price. In this case, the elasticity of demand between two price and quantity combinations is -3.74.

Step-by-step explanation:

To calculate the elasticity of demand between two price and quantity combinations, we can use the formula: percentage change in quantity divided by the percentage change in price.

In this case, the initial price of the laptop computer is $2750 and the final price is $2880. The initial quantity is 446,000 laptops and the final quantity is 321,000 laptops.

The percentage change in quantity is (321,000 - 446,000) / ((321,000 + 446,000) / 2) * 100 = -27.99%.

The percentage change in price is ($2880 - $2750) / (($2880 + $2750) / 2) * 100 = 7.48%.

Therefore, the elasticity of demand is -27.99% / 7.48% = -3.74.