Answer:
The price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price.
Using the formula, we can calculate the price elasticity of demand as follows:
Price elasticity of demand = ((Q2 - Q1) / ((Q1 + Q2) / 2)) / ((P2 - P1) / ((P1 + P2) / 2))
Where:
Q1 = 500
Q2 = 470
P1 = 5
P2 = 6
Price elasticity of demand = ((470 - 500) / ((500 + 470) / 2)) / ((6 - 5) / ((5 + 6) / 2))
Price elasticity of demand = (-30 / 485) / (1 / 5.5)
Price elasticity of demand = -0.3144
Since economists express the price elasticity of demand as a positive number, we can take the absolute value of the result to get the price elasticity of demand as 0.3144.