Question

Solve :

Price elasticity of demand equals the percentage change in quantity demanded divided by the percentage change in price.
The news clip tells us that if the price rises from $3 per gallon to $4 per gallon, the quantity demanded falls by 5%. So the percentage change in the quantity demanded is 5%.
price of a gallon of gasoline rises from $3 to $4, the increase in the price of a gallon of gasoline is $1, and the average price is $3.50. So the percentage increase in the price of gasoline is 28.6%.
The price elasticity of demand is ______

Answer 1

The price elasticity of demand is -0.1748.

Step-by-step explanation:

The price elasticity of demand can be calculated by dividing the percentage change in quantity demanded by the percentage change in price. In this case, the percentage change in quantity demanded is -5%, and the percentage change in price is 28.6%. Therefore, the price elasticity of demand is calculated as:

Price elasticity of demand = (-5%)/(28.6%) = -0.1748