Question

The demand function for a new sound system takes the form

P = a + bQ where a > O and
b < O.
If the price is $482, demand is 302 and the price elasticity of
demand is - 0.2. Calculate the value o

Answer 1

The elasticity in moving from a quantity of 5 to a quantity of 6 is -0.22.

Step-by-step explanation:

To calculate the elasticity, we need to use the formula:

E = (dQ/Q) / (dP/P)

Where dQ is the change in quantity, Q is the initial quantity, dP is the change in price, and P is the initial price. In this case, the initial quantity is 5 and the final quantity is 6, so dQ = 6 - 5 = 1. The initial price is 48 - 3(5) = 33, and the final price is 48 - 3(6) = 30, so dP = 30 - 33 = -3.

Substituting these values into the elasticity formula: E = (1/5) / (-3/33) = -0.22

Therefore, the elasticity in moving from a quantity of 5 to a quantity of 6 is -0.22.